Contracts
A Connecticut buyer signs a purchase and sale agreement and provides a $10,000 earnest money deposit. The buyer discovers a material defect during inspection and invokes the inspection contingency to terminate. The earnest money:
AIs forfeited to the seller as liquidated damages
BIs split between the buyer and the seller
CIs returned to the buyer in full✓ Correct
DIs paid to the real estate broker as a cancellation fee
Explanation
If a buyer properly invokes a valid inspection contingency to terminate the contract, the earnest money is returned to the buyer. The contingency protects the buyer's deposit in the event of a permitted termination.
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