Contracts
Which of the following best describes 'liquidated damages' in a real estate contract?
ADamages calculated by a court after a trial
BA pre-agreed amount of damages specified in the contract, such as forfeiture of the earnest money deposit✓ Correct
CDamages paid by the seller to the buyer for failing to disclose defects
DThe cost of title insurance paid at closing
Explanation
Liquidated damages are a predetermined amount of compensation agreed upon by the parties in the contract, representing the damages one party suffers if the other defaults. In real estate, this is commonly the earnest money deposit.
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