59. A buyer has completed a purchase agreement with a real estate agent. The seller accepts the agreement. The agreement is contingent upon financing with the terms of a conventional loan at 4% interest due and payable in 30 years. The buyer has seven business days to provide verification to the seller of loan approval. If the clause 'time of the essence' is in the contract, what action, if any, MAY the seller take if the loan approval is not received within the seven business days?
Answer: D
The seller may terminate the purchase agreement due to the buyer's breach of contract.
If the loan approval is not received within the specified seven business days, the seller has the option to terminate the purchase agreement, as the buyer has failed to meet the financing contingency, resulting in a breach of contract.
A) None. The offer has been accepted and remains enforceable by the buyer.
This option is incorrect because, while the offer has been accepted, the buyer's failure to provide loan approval within the agreed timeframe constitutes a breach of contract. The seller is not obligated to keep the agreement if the buyer does not fulfill the contingency.
B) Require the buyer to perform under the legal remedy of specific performance.
This choice is incorrect as specific performance is a remedy typically sought when a party fails to fulfill their contractual obligations, particularly in unique transactions like real estate. However, in this case, the buyer has not met the financing condition, making specific performance inapplicable.
C) Keep the buyer's earnest money for non-performance of the bilateral contract.
While the seller may have rights to the earnest money under certain circumstances, this action is not the primary or guaranteed response to the situation. The correct action is to terminate the agreement due to the buyer's breach of the financing contingency.
D) Terminate the purchase agreement as a buyer is in breach of contract.
This is the correct answer. The buyer's failure to provide loan approval within the stipulated seven business days means they have not complied with the terms of the contract, allowing the seller to terminate the agreement due to breach.
Conclusion
The correct answer is D because it directly addresses the consequences of the buyer's non-compliance with the financing contingency. All other options either misinterpret the legal implications of the accepted offer or fail to recognize the seller's right to terminate the agreement in case of a breach. Thus, option D is the only appropriate course of action under the circumstances.