A buyer and seller in Seattle execute a purchase and sale agreement with a 15-day financing contingency. The buyer's broker, believing the buyer will easily qualify, advises the buyer to waive the financing contingency to make the offer more competitive. The buyer waives the contingency in writing. Three weeks later, the lender denies the loan due to a recent job change the buyer failed to disclose to the lender. The buyer demands return of the $50,000 earnest money, claiming the broker's advice constitutes negligence that voids the waiver. Which of the following is the most accurate legal analysis?
Correct Answer
A) The buyer may have a claim against the broker for negligence, but the waiver is valid and the seller is entitled to retain the earnest money
This question tests the intersection of agency liability and contract law. The buyer's written waiver of the financing contingency is a valid contractual act — the buyer, as a competent adult, signed the waiver. The seller, who relied on the waiver in accepting the offer, is entitled to the earnest money as liquidated damages when the buyer fails to perform. However, the buyer may have a separate claim against the broker for negligence under RCW 18.85 and potentially under RCW 19.86 (Consumer Protection Act) if the broker's advice was unreasonable given the circumstances. These are two separate legal relationships: (1) buyer vs. seller (contract law — seller wins), and (2) buyer vs. broker (negligence — potentially viable claim). The broker's potential liability does not undo the buyer-seller contract.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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.
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