If a buyer is unable to close due to a financing contingency, how is their obligation affected?

In a real estate transaction, a financing contingency is a provision included in a purchase agreement that makes the buyer's obligation to complete the purchase conditional upon securing financing. If the buyer is unable to close the transaction because they cannot obtain financing as stipulated in the contingency, their obligation to proceed with the closing is typically nullified. This means that they are released from their obligations under the contract without penalty.

The contingency serves as a protective measure for the buyer, ensuring that they are not held liable for a transaction they cannot financially complete. Therefore, if the buyer's inability to secure financing is covered by a valid contingency in the contract, they can withdraw from the agreement without facing repercussions, such as forfeiting their earnest money deposit or facing legal action for breach of contract.

In this context, the option indicating that the buyer is released from obligation accurately reflects the nature of financing contingencies and the implications they have on a buyer's responsibilities within a real estate transaction.