Question 63

The seller keeps the earnest money.

When a seller defaults on a contract, it is typical for them to retain the earnest money as a form of compensation for their breach of contract.

A) The earnest money is returned to the buyer.

This option is incorrect because when a seller defaults, they generally do not return the earnest money to the buyer. Instead, the earnest money is often forfeited and kept by the seller as a penalty for not fulfilling the contract.

B) The seller keeps the earnest money.

This option is correct as it reflects the common practice in real estate transactions where the seller retains the earnest money when they default on the agreement. This serves as compensation for the potential loss and inconvenience caused to the seller.

C) The buyer receives the deed.

This option is incorrect because if the seller defaults, the buyer does not automatically receive the deed. The default means that the seller has failed to fulfill their obligations, which prevents the transfer of ownership.

D) The seller prorates all costs.

This option is also incorrect. Prorating costs typically refers to the allocation of expenses such as property taxes or utilities, and does not apply in the context of a seller defaulting on a contract.

Conclusion

In summary, the correct answer is that the seller keeps the earnest money, as this is a standard consequence of a seller defaulting on a contract. The other options fail to accurately reflect the typical legal and financial ramifications of such a default, reinforcing the notion that the seller retains the earnest money as compensation.