Contracts
An Oregon purchase agreement specifies that the buyer must obtain financing at 'not to exceed 6.5% interest rate.' The buyer receives a loan offer at 6.75%. What is the effect?
AThe buyer must accept the loan at any rate and close
BThe financing contingency is not satisfied; the buyer may typically cancel and recover earnest money✓ Correct
CThe seller must contribute to lower the rate
DThe contract automatically extends for 30 days to find better financing
Explanation
If a purchase contract specifies a maximum interest rate financing contingency and the buyer cannot obtain a loan at or below that rate, the financing contingency is not satisfied. The buyer has the contractual right to terminate and recover their earnest money, provided they acted in good faith and the contingency has not been waived.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Right of First RefusalA contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.
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