Question: Buyer’s agent sent over a cancellation after the Due Diligence Deadline. The reason stated was “Other”…Findings from Home Inspection. Even though they clearly stated a due diligence reason, the agent is arguing that they can still cancel because of Financing and Appraisal because their loan is not approved yet. Can an agent cancel a contract for Due Diligence but use Financing and Appraisal Deadline?
Answer: The Buyer can still cancel before the Financing and Appraisal deadline for any loan related reason. The cancellation box would be marked in Section 2. The reason is because of the wording “In Buyer’s Sole Discretion”. It’s important to note that technically the Buyer may be cancelling for a Due Diligence issue, but that issue may also affect the ability for Buyer to procure the loan at the terms desired. It would be difficult for a Seller to argue for the Earnest Money. Buyer does not need to give any reason for the cancellation other than check the Box.
Here are the rules under Section 8.1 b) and c) of the REPC (b) Buyer’s Right to Cancel or Resolve Objections. If Buyer determines, in Buyer’s sole discretion, that the results of the Due Diligence are unacceptable, Buyer may either: (i) no later than the Due Diligence Deadline referenced in Section 24(b), cancel the REPC by providing written notice to Seller, whereupon the Earnest Money Deposit shall be released to Buyer without the requirement of further written authorization from Seller; or (ii) no later than the Due Diligence Deadline referenced in Section 24(b), resolve in writing with Seller any objections Buyer has arising from Buyer’s Due Diligence. (c) Failure to Cancel or Resolve Objections. If Buyer fails to cancel the REPC or fails to resolve in writing with Seller any objections Buyer has arising from Buyer’s Due Diligence, as provided in Section 8.1(b), Buyer shall be deemed to have waived the Due Diligence Condition, and except as provided in Sections 8.2(a) and 8.3(b)(i), the Earnest Money Deposit shall become non-refundable.