If a buyer defaults on a sales contract after depositing earnest money, what can the seller keep?

When a buyer defaults on a sales contract after depositing earnest money, the seller can keep the earnest money as liquidated damages. Liquidated damages refer to a predetermined amount of money that the parties agree upon in the contract as compensation for a breach. This concept is particularly important in real estate transactions, where earnest money serves as a form of security that indicates the buyer's intention to proceed with the purchase.

In this context, if a buyer fails to fulfill their obligations under the contract, the seller is often entitled to retain the earnest money. This retention serves as a reasonable estimation of the damages the seller might incur due to the buyer's default, such as lost opportunities to sell the property to other potential buyers during the period the property was under contract.

Compensatory damages represent a broader category of financial compensation for losses incurred due to a breach, but they typically require evidence of actual damages suffered, which may not always align with the simple retention of earnest money.

A retainer fee is not a term typically associated with real estate transactions in the same context as earnest money and liquidated damages. It's often used in different professional fields to secure the services of a professional.

The term good faith deposit essentially refers to the earnest money itself, but it does not specifically