FACTS: A buyer submitted an offer to the seller to purchase the property for $90,000.  On page 1 of the Arizona REALTORS® Residential Resale Real Estate Purchase Contract, the buyer indicated, “$90,000 cash at closing.”  There were no terms disclosed on page 2 of the Contract under Section 2 Financing.  The buyer did not submit a Pre-Qualification Form as a part of the Contract.

Although never disclosed to the seller, the buyer was obtaining a loan from a hard-money lender.  One week prior to closing, the hard-money lender denied the loan.  The buyer then issued an Unfulfilled Loan Contingency Notice and requested a return of the earnest money.

ISSUE: Is there a loan contingency when a buyer indicates that the transaction is an all-cash sale?

ANSWER: No.

DISCUSSION:         

In this instance, the buyer could not use the Unfulfilled Loan Contingency Notice because there was no loan contingency agreed to in the contract.  Line 68 of the contract states, “IF THIS IS AN ALL CASH SALE, Section 2 does not apply- go to Section 3.”  Further, the buyer did not submit a Pre-Qualification Form to the seller, and the Financing section was blank.

*Note: If the buyer had written on page 1, “$90,000 – cash funds provided by hard-money lender,” and had submitted a loan pre-qualification, and had filled out Section 2 of the Contract, then the buyer would have been able to submit the Unfulfilled Loan Contingency Notice and receive a return of her earnest money deposit.