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DEFAULT


Word of the day

DEFAULT

The nonperformance of a duty or obligation that is part of a contract. A default is normally a breach of contract, and the nondefaulting party can seek legal remedies to recover any loss. Defaults in long-term leases or contracts for deed include nonpayment of money when due, failure to renew insurance policies, failure to pay real estate taxes, damage to the property, and so forth.

Note that a buyer’s good-faith inability to obtain financing under a contingency provision of a purchase agreement is not considered a default (the performance of the contract depends on the buyer’s getting the property financed), and in this case, the seller generally must return the buyer’s deposit.

Junior mortgages usually contain a clause authorizing the holder of the junior mortgage to advance money to cure any default of the mortgagor under a prior mortgage. Were the first mortgage to remain in default and the lender to foreclose, it would have the effect of wiping out the junior mortgage.

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