FACTS: The buyer and seller entered into an Arizona REALTORS® Residential Resale Real Estate Purchase Contract (“Contract”).  Three (3) days prior to close of escrow the buyer has not signed loan documents and the buyer’s lender has not issued a loan denial. 

ISSUE: Should the seller issue a cure notice?

ANSWER: Yes. 

DISCUSSION:

Pursuant to the Contract at section 2(b), no later than three (3) days prior to COE, the buyer must either: (1) sign the loan documents; (2) deliver notice of loan approval without PTD conditions and dates of receipt of Closing Disclosures from lender; or (3) deliver a notice of inability to obtain loan approval.  If the buyer fails to sign the loan documents or deliver the required notice three (3) days prior to the COE Date, the seller should give the buyer a Cure Period Notice pursuant to section 7(a).  If the buyer cures by closing escrow, there is no breach.  If the buyer cures by submitting the notice of inability to obtain loan approval, there is no breach.  If the buyer did not obtain loan approval and fails to deliver the notice of inability to obtain loan approval, the buyer is in breach (not for the failure to qualify, but for the failure to deliver the notice) and the seller agrees to accept the earnest money as damages as set forth in section 7(b).  If the buyer obtained loan approval, but refuses to close escrow, the buyer is in breach of contract and the seller should consult legal counsel.