Contracts
In Nevada, what happens to earnest money if a buyer backs out of a contract without a valid contingency?
AThe earnest money is always returned to the buyer
BThe earnest money may be forfeited to the seller as liquidated damages for breach of contract, subject to the terms of the purchase agreement✓ Correct
CThe earnest money is automatically split between buyer and seller
DThe broker retains the earnest money as a penalty
Explanation
Under Nevada law, when a buyer breaches a purchase agreement without a valid contingency excuse, the seller may be entitled to retain the earnest money as liquidated damages. The purchase agreement typically includes a liquidated damages clause specifying that the earnest money represents the seller's damages in case of buyer default. Nevada agents must not release disputed earnest money without written consent from both parties or a court order.
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