85. Buyer wants loan contingency to protect earnest money. Should include:
Answer: B
Loan contingency clause is essential for protecting earnest money.
Including a loan contingency clause is crucial for a buyer seeking to protect their earnest money in the event that they are unable to secure financing for the property.
A) purchase-money clause.
A purchase-money clause is related to the terms of the financing and typically outlines the conditions under which the buyer will obtain the funds necessary to purchase the property. However, it does not specifically protect earnest money in the event that a loan is not secured, making it an inadequate choice for this scenario.
B) loan contingency clause.
The loan contingency clause explicitly protects the buyer's earnest money by allowing them to back out of the purchase if they cannot secure financing. This clause ensures that the buyer is not financially penalized if their loan application is denied, thereby safeguarding their earnest money deposit.
C) pre-qualification letter.
A pre-qualification letter indicates that a buyer has been assessed by a lender and is likely to qualify for a loan. While it is a useful document in the home-buying process, it does not provide any legal protection for earnest money if the buyer ultimately fails to secure financing.
D) waiver of lien.
A waiver of lien pertains to the relinquishment of a claim against a property, typically used in construction or after a loan is paid off. This option does not relate to financing contingencies or the protection of earnest money, making it irrelevant in this context.
Conclusion
The loan contingency clause is the only option that directly addresses the buyer's need to protect their earnest money in case they are unable to obtain financing. Other options either do not pertain to earnest money protection or are not relevant to the financing process, reinforcing that the loan contingency clause is the most appropriate choice.