A buyer contracts to purchase a California single-family home for $425,000 and deposits $15,000 in earnest money. The liquidated damages clause is properly initialed by both parties. The buyer defaults. Per their listing agreement, the seller agrees to split the retained liquidated damages equally with the listing broker. How much does the listing broker receive?
Correct Answer
D) $6,375
Under California Civil Code §1675, the maximum liquidated damages a seller may retain from a residential purchase deposit is 3% of the purchase price. Here, 3% × $425,000 = $12,750. Although the buyer deposited $15,000, the seller may only retain $12,750 as liquidated damages; the remaining $2,250 must be returned to the buyer. Per the listing agreement, the seller splits the $12,750 retained amount equally with the listing broker: $12,750 ÷ 2 = $6,375.
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