Contracts
A Virginia buyer has a financing contingency that states the contract is contingent on obtaining a 30-year fixed mortgage at no more than 7% interest. If the best rate available is 7.25%, the buyer:
AMust close since the rate is close enough
BMay terminate the contract and recover earnest money as the specific terms of the contingency were not met✓ Correct
CMust accept the higher rate or pay a penalty
DMust seek a second lender before terminating
Explanation
If the financing contingency specifies a maximum interest rate and the buyer cannot obtain financing at that rate, the contingency is not satisfied. The buyer may terminate the contract and recover the earnest money.
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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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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