19. Buyers are under contract to purchase a home. The purchase agreement contains a financing contingency clause. The buyers advise their broker that a lender has orally denied their loan application. Which of the following is true?
Answer: B
Buyers are entitled to written notice of the denial of credit.
Buyers have the right to receive a written notice regarding the denial of their loan application. This written notice is essential for them to understand the reasons for the denial and to take appropriate actions regarding the financing contingency in their purchase agreement.
A) The licensee should contact the seller to request purchase money financing.
This option is incorrect because the buyers have already been denied financing, and contacting the seller for purchase money financing does not address the buyers' entitlement to a written notice of denial. The primary concern here is the buyers' awareness of their loan status, not seeking alternative financing at this stage.
B) The buyers are entitled to written notice of the denial of credit.
This option is correct as it directly relates to the buyers' rights. Under various lending regulations, including the Equal Credit Opportunity Act, lenders are required to provide written notice to applicants when their credit is denied, ensuring transparency and allowing buyers to understand their financial standing.
C) The sellers are required to extend the financing contingency until written denial is received by the borrower.
This option is incorrect because the financing contingency is based on the buyers' ability to secure financing, and the denial does not necessitate an extension until written notice is received. The buyers' oral notification of denial is sufficient to trigger actions related to the contingency.
D) The buyers are not subject to specific performance due to the Equal Credit Opportunity Act.
This option is also incorrect as the Equal Credit Opportunity Act does not exempt buyers from specific performance obligations in a real estate contract. The buyers must still adhere to the terms of the contract unless they can legally justify their inability to perform due to the financing issue.
Conclusion
The correct answer is that buyers are entitled to written notice of the denial of credit, which is crucial for their understanding of the situation. All other options fail to address the buyers' rights and the implications of the financing contingency appropriately, focusing instead on actions that may not align with the buyers' current status regarding their loan application.