Missed Financing Deadline and Earnest Money
A buyer accepted a Virginia purchase agreement on March 2. The contract states time is of the essence and all deadlines run from acceptance. It includes: home inspection contingency 10 days; appraisal contingency 17 days; financing contingency 21 days; settlement May 1. Earnest money is $8,000. On March 12 the inspector reports a failing roof, and the buyer asks the seller to replace it. The seller refuses. On April 10 the lender denies the loan, citing the roof. The buyer's agent emails the listing agent on April 12: 'Buyer is terminating due to loan denial; please release the deposit.' The seller says the financing contingency expired March 23 and refuses to sign a release.
1. Calculate the inspection, appraisal, and financing contingency deadlines and assess whether the April 12 notice was timely.
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Using acceptance March 2 as day 0: inspection 10 days = March 12; appraisal 17 days = March 19; financing 21 days = March 23. The April 12 email was 20 days late. Even though the lender denied on April 10, the contract required written notice and evidence by the financing deadline if time was of the essence. The buyer's March 12 repair request did not extend the financing deadline unless the contract or a signed amendment said so. The notice was untimely.
2. What is the likely earnest-money outcome, and what should the buyer's agent do now?
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Likely the seller has a strong argument to retain the $8,000, but the agent should not give legal advice or promise a result. The buyer's agent should immediately send written notice with the denial letter, request a written release or mutual release, and review the contract's notice, cure, and dispute-resolution provisions. The agent can negotiate: the seller may release part to avoid a dispute, or the buyer may assert seller interference if the seller's refusal to repair caused the denial. Escalate to the broker and recommend counsel if the seller refuses. Do not release funds unilaterally.
3. How would your analysis change if the lender's denial letter was dated March 20 but the buyer did not receive it until April 10?
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If the denial letter was dated March 20 but received April 10, the buyer still missed the March 23 written-notice deadline unless the contract excuses delayed receipt. The buyer should argue timely efforts and provide the dated letter, but the seller can rely on the deadline. The agent should document when the letter was received and seek a negotiated release; the outcome may turn on the contract's notice and excuse provisions. Legal counsel should interpret.