1. Mr. and Mrs. George enters into an agreement to buy a house owned by Samantha Jones. The sale will go forward if the Georges obtain financing for the mortgage. What kind of condition is this? Explain.
2. Now, assume that the Georges successfully obtained the financing; but, and Samantha Jones is now refusing to sell them the house. Do the Georges have any recourse? Explain in detail.
Home Mortgage Loan:
This question calls for a basic understanding of a home mortgage loan. A home mortgage loan is a financing arrangement, where the borrower (homebuyer) secures financing from the lender (mortgage issuer) by pledging the home as collateral. In such an arrangement, the lender has a claim on the property, until the borrower repays his obligation.
Answer and Explanation:
The agreement between the Georges and Samantha Jones is known as a conditional sales agreement. More specifically, it is known as a home sale agreement with a conditional financing clause. The clause protects the Georges, by specifying that they agree to buy Ms. Jones property if they can procure appropriate financing. It provides the Georges an "out," in the event they cannot secure adequate financing.
Assuming the appropriate language has been incorporated into the agreement, Ms. Jones is obligated to honor the agreement - for as long as it is in force. She can't back out, while the Georges is negotiating to finance. This is true whether she changes her mind about selling the property, locates a higher bidder, or is motivated to cancel the sale for any other reason.
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from Finance 102: Personal FinanceChapter 7 / Lesson 4