Contracts
A buyer defaults on a purchase contract that includes a liquidated damages clause. The seller's remedy is typically:
ASue the buyer for the full purchase price
BRetain the earnest money deposit as specified✓ Correct
CImmediately relist and sell the property with no further obligations
DRequire specific performance by court order
Explanation
A liquidated damages clause specifies in advance the amount of damages (typically the earnest money) that the seller may keep if the buyer defaults. This pre-agreed remedy limits the seller's recovery to that amount.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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