Financing Condition of the REPC (Section 8.3)
June 13, 2018
On the hotline, I have received a number of calls dealing with Section 8.3(b)(i) of the REPC. This Section reads, “If Buyer, in Buyer’s sole discretion, is not satisfied with the terms and conditions of the Loan, Buyer may, after the Due Diligence Deadline referenced in Section 24(b), if applicable, cancel the REPC by providing written notice to Seller no later than the Financing & Appraisal Deadline referenced in Section 24(c); whereupon $___________ of Buyer’s Earnest Money Deposit shall be released to Seller without the requirement of further written authorization from Buyer, and the remainder of Buyer’s Earnest Money Deposit shall be released to Buyer without further written authorization from Seller.”
Note that this Section gives the Buyer the option to indicate that a portion of the earnest money will become non-refundable if the Buyer cancels after Due Diligence Deadline, but before the Financing and Appraisal Deadline for financing reasons. Practically speaking, this Section allows Buyers to creatively make their offer stronger without increasing the purchase price. Please be mindful that this section does not modify the appraisal section of the REPC (Section 8.2). So if the appraisal comes in below the purchase price and the Buyer cancels within the Financing & Appraisal window, the Buyer would still get all the earnest money, regardless of the amount indicated in Section 8.3(b)(i) of the REPC.