Contracts
What happens to the buyer's earnest money deposit if the buyer backs out of a purchase contract after removing all contingencies in California?
AThe full deposit is always returned to the buyer
BThe seller may be entitled to retain the deposit as liquidated damages if the contract includes a liquidated damages clause initialed by both parties✓ Correct
CThe deposit is split equally between buyer and seller
DThe deposit is forfeited to the listing broker
Explanation
If the California RPA liquidated damages clause is initialed by both buyer and seller, the seller's remedy for a buyer's breach is limited to retaining the deposit (up to 3% of purchase price for residential property) as liquidated damages, unless the seller elects to pursue other remedies.
Related California Contracts Questions
- Which of the following is NOT a required element of a valid contract?
- When a buyer makes a counteroffer to a seller's counter-counteroffer, what happens to the original offer?
- Under what circumstances may a buyer receive their earnest money deposit back without penalty in California?
- A real estate purchase contract is fully executed when:
- What is 'specific performance' as a legal remedy in real estate contracts?
- A contract that is 'voidable' differs from a 'void' contract in that:
- Specific performance is a remedy that requires:
- Which of the following is a valid reason to void a contract?
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