What happens if a buyer cannot obtain financing and a financing contingency is included in the purchase contract?
Correct Answer
B) Allows the buyer to cancel the contract and receive a refund of earnest money
A financing contingency protects the buyer by allowing them to cancel the contract and recover their earnest money deposit if they are unable to obtain the specified financing within the agreed timeframe. Without this contingency, a buyer who fails to secure financing could forfeit their earnest money for breach of contract.
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Related Topics & Key Terms
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Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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- → A Rhode Island licensee encounters a listing agreement lets the principal broker retain a portion of deposit money upon buyer default. What should the licensee remember?
- → A Hawaii licensee is reviewing the commission asks to inspect escrow and trust records. What is the best answer?
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