Here’s a comprehensive list of possible questions about the Delivery of Increased Deposit and Liquidated Damages Addendum, with explanations for each:
- What is the purpose of the Delivery of Increased Deposit and Liquidated Damages Addendum?
It specifies the buyer’s agreement to increase the earnest money deposit after a set condition or time, and outlines how liquidated damages will apply if the buyer defaults after that increased deposit is made.
- When should the increased deposit be delivered?
The addendum states the exact date, number of days after acceptance, or event (such as contingency removal) when the increased deposit must be paid into escrow.
- How is the increased deposit amount determined?
The addendum clarifies the agreed-upon additional deposit amount, which is usually negotiated between buyer and seller at the offer stage.
- What happens if the buyer fails to deliver the increased deposit on time?
If the buyer does not deposit the funds by the agreed deadline, the seller may issue a Notice to Perform, cancel the contract, or proceed with other remedies allowed in the agreement.
- Does the liquidated damages clause need to be initialed again?
Yes, because an increased deposit changes the potential damages amount, both parties must re-initial the liquidated damages provision for it to be enforceable.
- How does liquidated damages work with an increased deposit?
If the buyer defaults after the increased deposit is made and the liquidated damages clause is initialed, the seller can retain the deposit (up to 3% of the purchase price for residential properties in California).
- Is the increased deposit refundable if the sale cancels?
It depends on whether the cancellation occurs under a valid contingency period or due to buyer default. The addendum works in conjunction with the purchase agreement’s cancellation terms.
- How should the increased deposit be delivered to escrow?
The addendum does not specify payment methods, but best practice is via wire transfer, cashier’s check, or other verifiable funds directly to escrow.
- Does the increased deposit affect the buyer’s financing approval?
In some cases, lenders may verify updated deposit amounts for underwriting, especially if it affects cash-to-close figures.
- Can the increased deposit date be extended?
Yes, but only if both parties agree in writing, often through an addendum or amendment to the contract.
- What documentation should be kept after delivering the increased deposit?
Agents should obtain a receipt or confirmation from escrow to prove the deposit was made by the required date.
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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