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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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