Illinois Real Estate Exam Practice Question
The following statement was found in a real estate sales contract. 'in the event of a default by the purchaser, the forfeiture of the earnest money to the seller will be the only compensation to which the seller will be entitled.' This statement most likely describes a
Correct Answer: B
Rationale: The statement describes a liquidated damages clause, which specifies that the seller's sole remedy for a buyer's default is the forfeiture of the earnest money. This pre-determined compensation simplifies the resolution process and provides clarity for both parties.
Option A, a broker protection clause, relates to ensuring a broker's commission rather than addressing buyer defaults. Option C, a default delivery clause, is not a standard term in real estate contracts and does not pertain to compensation. Option D, an indemnification clause, involves protection against losses or damages but does not specifically limit the seller’s remedy to earnest money forfeiture.
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