Contracts
A Minnesota purchase agreement states the buyer will pay $320,000 with $15,000 earnest money. The buyer backs out without a valid contingency. What typically happens to the earnest money?
AIt is returned to the buyer automatically
BIt is split equally between buyer and seller
CIt may be forfeited to the seller as liquidated damages✓ Correct
DIt is held by the title company indefinitely
Explanation
In Minnesota, when a buyer breaches a purchase agreement without a valid contingency, the earnest money may be forfeited to the seller as liquidated damages. The purchase agreement typically specifies how earnest money is handled upon default. This is standard contract law applied to real estate transactions.
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