A Virginia buyer's agent represents a buyer who has a contract with both a financing contingency and a home sale contingency. The financing contingency deadline is November 1 and the home sale contingency deadline is November 15. By October 28, the buyer's home sells and the buyer removes the home sale contingency in writing. However, the buyer's lender denies the loan on November 3. The seller claims the buyer is in default because the home sale contingency was already removed. Which statement is most accurate?
Correct Answer
A) The buyer may still terminate under the financing contingency if the loan denial occurred before the November 1 deadline, but is in default if the denial came after
Each contingency in a contract operates independently. Removing the home sale contingency has no effect on the financing contingency. The financing contingency deadline was November 1. If the loan denial occurred on or before November 1, the buyer could terminate under that contingency. However, the loan was denied on November 3, which is after the November 1 financing contingency deadline. Because the deadline had passed without the buyer removing or satisfying the contingency, the buyer's right to terminate under the financing contingency may have expired, potentially placing the buyer in default.
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Related Topics & Key Terms
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Related Concepts
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
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