What happens to the buyer's earnest money deposit if the buyer backs out of a purchase contract after removing all contingencies in California?
Why The seller may be entitled to retain the deposit as liquidated damages if the contract includes a liquidated damages clause initialed by both parties Is Correct
Answer B: The seller may be entitled to retain the deposit as liquidated damages if the contract includes a liquidated damages clause initialed by both parties
Exam Tip: Contracts
Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.
Key Contracts Terms in This Question
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
People Also Study
Related California Questions
- What is liquidated damages in a California residential purchase agreement?Contracts
- A liquidated damages clause in a California residential purchase agreement limits the seller's damages, if the buyer defaults, to:Contracts
- What is 'liquidated damages' in a California residential real estate purchase contract?Contracts
- An earnest money deposit in a purchase contract is typically held by:Contracts
- In California, a lender who forecloses on a purchase money deed of trust on a 1-4 unit residential property occupied by the borrower is generally:Finance
- A broker receives a check as earnest money. Under California law, the broker must deposit it into the trust account within:Trust Funds
- A broker must deposit a buyer's earnest money deposit into a trust account within:Trust Funds
- A salesperson collects an earnest money deposit from a buyer. What must the salesperson do with these funds?Trust Funds
Key Terms to Know
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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.
Math Concepts
State-Specific Concepts
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →