Posted by Rob FL on December 30, 2000 at 08:17:05:
Basically it means that if for some reason you have to default under the contract that all the seller gets is the earnest money deposit and nothing more. Here is the clause I use from my own contract addendum:
"If Buyer fails to perform according to the Contract within the time set forth therein, Seller may retain as liquidated damages and not as a penalty all of the deposit(s) specified in paragraphs II. (a) and (b) of Contract, it being agreed that this is Seller’s exclusive remedy; whereupon, Buyer and Seller shall be relieved of all obligations under the Contract. "
I always leave the earnest money deposit in the form of cash. (Actually it is a check.) I never use a promissory note. I mean, after all, a promissory note to me means you don’t have the cash. If for some reason you default on the contract, then what? Do you really have the money? If you don’t, what will you do? Tell the seller you don’t have any money and the promissory note is worthless? I don’t do business that way. There are many times when the seller is desparate (and no Realtor is involved) that I bind the contract with a $1 deposit. But in reality, if you don’t have a couple hundred bucks to use for a deposit, you are kidding yourself in my opinion. I mean, after all this is a business. Always remember the 11th Commandment “Thou shalt not kid thyself.”