## Facts

- A buyer agreed in writing to purchase a seller’s residential property for $130,000 and paid a $13,000 deposit.
- The contract required settlement within 45 days and provided that if the buyer failed to make full settlement, the deposit could be forfeited at the seller’s option, relieving the buyer of further liability.
- The contract was “subject to” the buyer obtaining, within 10 days, a written commitment for a $100,000 first mortgage for a 20-year term at the prevailing interest rate.
- The contract also required the buyer to apply immediately for financing and submit necessary papers, including resubmission and appeal where required; failure to do so gave the seller the right to declare the deposit forfeited.
- The buyer applied to a bank and was told financing was likely on a 20-year amortization with a five-year balloon payment; after learning what a balloon payment entailed, the buyer withdrew the application.
- The buyer informed the seller’s agent she would not proceed, citing financing concerns and cost; the bank would not offer non-balloon terms, and the buyer did not seek other lenders.
- The buyer demanded return of the deposit based on failure of the financing contingency; the seller refused and asserted the buyer’s lack of diligence triggered forfeiture.
- After a bench trial, the circuit court awarded the buyer $13,000 and denied the seller’s counterclaim; the seller appealed.

## Issues

1. Whether the financing contingency operated as a condition precedent to the buyer’s duty to settle, such that failure to obtain the specified financing excused performance and required return of the deposit.
2. Whether the buyer’s withdrawal of the loan application and failure to pursue other financing constituted a lack of required good-faith and diligent efforts, permitting the seller to forfeit the deposit.

## Decision

- The appellate court affirmed the judgment for the buyer.
- The court treated the financing contingency as a condition precedent; without a commitment matching the contract’s terms, the buyer’s duty to settle did not become unconditional.
- The court deferred to the trial court’s factual findings that the buyer’s conduct did not amount to a bad-faith failure to pursue financing on the contract’s terms.
- Because the available financing (balloon structure) did not satisfy the contemplated 20-year mortgage commitment, the condition precedent failed.
- The forfeiture clause did not apply where the buyer’s nonperformance resulted from failure of a condition precedent rather than breach of an unconditional duty to settle.

## Legal Principles

- A real-estate contract “subject to” the buyer obtaining specified financing ordinarily creates a condition precedent to the buyer’s duty to perform.
- When specified financing cannot be obtained despite the buyer’s good-faith, reasonable efforts, the buyer’s duty to purchase does not arise and the deposit is generally recoverable absent clear contrary language.
- A deposit forfeiture provision tied to failure to settle is not enforced when the failure to settle is caused by nonoccurrence of a contractual condition precedent rather than breach of an unconditional obligation.
- In a bench trial, appellate review gives substantial deference to the trial court’s factual findings unless clearly erroneous.

## Conclusion

The court held that the buyer’s obligation to close never became unconditional because the contract’s financing condition precedent was not satisfied by the only financing available, and the trial court’s findings supported that the buyer did not act in bad faith; therefore, the buyer was entitled to recover the deposit and the seller could not enforce forfeiture.


Bushmiller v. Schiller, 368 A.2d 1044 (Md. Ct. Spec. App. 1977)