What are liquidated damages in a real estate contract?
Correct Answer
B) A pre-agreed amount specified in the contract to be paid upon breach
Liquidated damages are a pre-agreed amount specified in the contract to be paid in the event of a breach, typically the earnest money deposit in real estate transactions. They are enforceable in Montana when actual damages would be difficult to calculate and the amount is a reasonable estimate of anticipated harm — not a penalty. In many Montana purchase agreements, the earnest money serves as liquidated damages if the buyer defaults.
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Related Topics & Key Terms
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Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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