ANSWER
Based on the facts presented, buyer is already without the protection of the Financing Contingency. Even if buyer terminated today, prior to the closing date, buyer would not be entitled to recover the EM based on the financing contingency. This is because buyer failed to disclose buyer's reliance on a contingent source of funds and by concealing that information from seller, prior to mutual acceptance, buyer either misrepresented buyer's financial capacity (at best) or engaged in fraud by intentionally inducing seller to enter an agreement with buyer by wrongfully claiming that buyer was not relying on a contingent source of funds (at worst). Regardless of whether buyer knew what buyer was doing at the time, based on these facts, buyer is unable to recover the EM based on the financing contingency.
Form 22A, paragraph 5 says that before buyer is entitled to recover EM based on the financing contingency, buyer's lender must provide a letter stating three things, one of which is that buyer had sufficient funds to close the transaction, assuming the loan had been timely funded. Buyer's lender will not be able to state that fact and thus, there is no way for buyer to recover the EM based on the Form 22A financing contingency. Waiving the financing contingency at this point in the transaction would seem to be a meaningless act because buyer is already without the protection of the financing contingency.
All of this began with drafting of the buyer's offer. Buyer and broker should be aware that Form 21, paragraph (a) says that buyer is NOT relying on a contingent source of funds unless otherwise disclosed in the PSA. Buyer does not get to choose whether the contingent funds need to be disclosed. The buyer's offer represents to seller that if buyer is relying on contingent funds, that fact WILL be disclosed by buyer so that seller can evaluate the likelihood of those funds being timely available. This transaction illustrates that no matter how confident buyer is in a contingent source of funds, anything can happen. Thus, if buyer does not have US dollars in a bank account in buyer's name, the funds are contingent and must be disclosed to seller PRIOR to seller's acceptance of buyer's offer. This buyer's choice not to disclose buyer's reliance on contingent funds gives total leverage to seller, now that buyer requires a closing date extension. If the parties cannot resolve this issue, broker should advise her client to seek legal counsel.
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