1. A broker received a $50,000 deposit on a selling price of $400,000. However, the buyer breached the contract, and the seller claimed that the buyer had forfeited the deposit. In this situation:
A. the seller may not retain any of the deposit
B. the seller may retain no more than 3% of the purchase price as liquidated damages
C. the seller could deduct any actual damages caused by the breach from the deposit
D. the seller may retain the entire deposit
- Question #1
- Answer: B
- Explanation: Assuming that the buyer and seller signed a liquidated damages provision in the deposit receipt, the buyer's breach of contract entitles the seller to keep no more than 3% of a residential property's sale price as liquidated damages.