Sandra, a buyer in California, contracts to purchase a home in Modesto for $380,000. During the inspection contingency period, she discovers a cracked foundation. She timely submits a contingency cancellation request. Under the California RPA, what happens to Sandra's earnest money deposit?
Correct Answer
A) The deposit is returned to Sandra in full
Under the standard California RPA, when a buyer cancels within the inspection contingency period using a proper cancellation notice, the buyer is entitled to a full refund of the earnest money deposit. The contingency period exists to allow the buyer to investigate the property and withdraw without penalty.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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