Hey Roswell, I'm sure you're well aware of this quote from page 2 of the standard AAR Purchase Contract, but here it is for reference:
81. Changes: Buyer shall immediately notify Seller of any changes in the loan program, financing terms, or lender described in the
82. Pre-Qualification Form if attached hereto or LSU provided within five (5) days after Contract acceptance and shall only make any
83. such changes without the prior written consent of Seller if such changes do not adversely affect Buyerâ€™s ability to obtain loan
84. approval without PTD conditions, increase Sellerâ€™s closing costs, or delay COE.
In your 'what-if' scenario, if the buyer switched to an FHA loan and never told the seller, everything went smoothly with the FHA appraisal, no additional costs were asked of the seller, the loan docs showed up at title on time, and the transaction closed escrow on time (per the contract) -- then my best guess (and it's strictly a guess) is that the seller and the seller's agent would not have a problem whatsoever.
However, as we all know, the chances of that happening are somewhere between slim and none. And in the event of a major 'crash and burn' scenario, the buyer would be guilty of failing to adhere to the above contractual stipulations. That might lead to a Cure Period Notice being issued by the seller, and if the default was not cured in a timely manner, then the seller could cancel the contract and keep the buyer's earnest money.
None of this should be construed as legal advice or legal interpretation of any specific situation. It's just my hypothetical opinion, given the hypothetical conditions you laid out, use of standard AAR contract, no addenda to the contract, etc., etc. As always, any buyer or seller who finds himself or herself in this situation should immediately consult with their RE agent, if not an attorney.
You have anything to add, Roswell?? ;-)