A buyer in Tacoma is purchasing a home using a VA loan. The purchase and sale agreement includes a financing contingency specifying a VA loan at no more than 6.5% interest. The buyer is approved for a VA loan but at 7.0% interest. The seller insists the buyer must close because the buyer was approved for a VA loan. Which of the following is correct under Washington contract law?
Correct Answer
A) The buyer may terminate the contract because the loan terms do not match the financing contingency specifications
A financing contingency in Washington specifies not only the loan type but also the terms — including the maximum interest rate. If the buyer cannot obtain financing at the specified terms (VA loan at no more than 6.5%), the contingency has not been satisfied even if a loan of the same type is available at different terms. The buyer is entitled to terminate the contract and recover earnest money because the financing contingency, as written, has not been fulfilled.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
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