A Vermont purchase agreement is contingent upon the buyer obtaining financing within 21 days. The buyer applies for a mortgage but is denied due to a low credit score. The buyer notifies the seller in writing within the contingency period and requests return of the $10,000 earnest money deposit. The seller refuses, claiming the buyer did not act in good faith. Under Vermont contract law and standard practice, what is the most likely outcome?
Correct Answer
C) The buyer is entitled to the return of the earnest money deposit because the financing contingency was not satisfied and notice was given within the contingency period
When a buyer provides timely written notice that a financing contingency has not been satisfied, the buyer is entitled to the return of the earnest money deposit. The contingency protects the buyer from being bound to a contract they cannot perform due to an inability to obtain financing. Vermont contract law and standard practice support the return of the deposit when a valid contingency fails and proper notice is given within the specified period.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
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.
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