Andrew E. Blanche, Jr., and Cynthia D. Blanche - Page 4

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          Petitioners did not complete the purchase because they believed             
          that the Hewitts were required to repair the property in order to           
          meet city inspection codes.3  Petitioners investigated outside              
          financing and were advised informally by two or three mortgage              
          companies that financing would not be approved if the Foxbriar              
          property failed to meet city inspection codes.  To avoid what               
          they believed would be a futile gesture, petitioners never                  
          formally applied for financing and, thus, were never approved or            
          denied financing.4                                                          
               The closing did not take place; consequently, the earnest              
          money contract expired on June 30, 1991.  Petitioners, however,             
          continued in possession of the Foxbriar property and continued              
          making the $1,000 monthly lease payments to the Hewitts.5                   
          Petitioners made their final lease payment to Mrs. Hewitt on                
          April 10, 1992.  During the period from September 1991 to April             

               3    Under the earnest money contract, the Hewitts were not            
          responsible for any repairs exceeding $1,500 in the aggregate.              
               4    The earnest money contract stated that "On Seller’s               
          receipt of all loan approvals and inspection reports, Seller                
          shall commence repairs".  Petitioners never presented the Hewitts           
          with any loan approval.                                                     
               5    The lease signed pursuant to the lease option stated              
          that, after June 30, 1991, the lease would automatically continue           
          on a month-to-month basis absent written notification of                    
          termination by either party.  As of Sept. 1991, the payments were           
          made out to Mrs. Hewitt only, at her instruction.  Mrs. Hewitt              
          informed petitioners that Mr. Hewitt had left her, and she had no           
          knowledge of his whereabouts.                                               

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