Property Ownership
Iowa's earnest money, if forfeited to the seller upon buyer default, may be subject to which Iowa rule?
AAutomatic equal split between buyer and broker
BThe seller retains the earnest money as liquidated damages if the contract so provides and the amount is reasonable✓ Correct
CMandatory return to the buyer by the IREC
DForfeiture to the county when the buyer defaults
Explanation
When a buyer defaults and the purchase agreement contains a liquidated damages clause, the seller may retain the earnest money as their remedy. Iowa courts may review whether the liquidated damages amount is a reasonable estimate of actual damages or an unenforceable penalty.
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