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B. Petitioners' Purchase of the Portland Residence
Petitioners bought a residence at 11425 S.E. Westgate Way,
Portland, Oregon (Portland residence), on July 19, 1989.
C. Petitioners' Sale of the Blue Lake Residence
1. The Earnest Money Agreement
On August 5, 1988, Robert and Jacqueline Soper (the Sopers)
leased the Blue Lake property from petitioners. On May 29, 1989,
petitioners and the Sopers signed an earnest money agreement
under which they agreed to transfer the ownership of the Blue
Lake property for $85,000. The Sopers paid $500 earnest money to
petitioners for the planned purchase under the agreement. In the
earnest money agreement, the Sopers agreed to make a good faith
effort to arrange financing for their purchase of the house
within a reasonable time, including applying for an FHA loan.
If the Sopers could not obtain an FHA loan, petitioners agreed to
arrange financing for the house for 1 year. After that time, the
Sopers were required to have arranged financing for the continued
mortgage. Petitioners were ready and willing to sell the Blue
Lake property after May 29, 1989. The Sopers intended to buy the
Blue Lake property at all times after May 29, 1989.
2. The Option Agreement
On October 30, 1989, the title to the Blue Lake property
was held in escrow by the Eureka Title Co. Because of financing
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