Contracts
In a real estate contract, the term 'liquidated damages' refers to:
AA penalty imposed by AREC
BA pre-agreed amount specified in the contract as damages if a party breaches✓ Correct
CThe cost of title insurance
DThe lender's origination fee
Explanation
Liquidated damages are a specific dollar amount agreed upon by the parties in advance to compensate for a breach of contract. In many real estate contracts, the earnest money serves as liquidated damages if the buyer defaults.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Math Concepts
State-Specific Concepts
AREC Regulation
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