ContractsHomebuying Glossary
Liquidated Damages
A pre-agreed amount (often the earnest money) that one party owes if they break the contract.
In plain English
A liquidated damages clause sets, in advance, the specific financial penalty for breaching the contract — in residential purchase agreements, this is typically capped at the buyer's earnest money deposit.
Why it matters
This clause is usually what limits your financial risk if you back out of a deal outside your contingencies — worth understanding exactly what you'd stand to lose.
Where you'll run into it
Guides and tools on TheBuyingPath that cover liquidated damages in context.
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