What is a common consequence of a default in a real estate transaction?

A common consequence of a default in a real estate transaction is that the seller can keep the earnest money. This deposit is typically made by the buyer as a demonstration of their commitment to the purchase. If the buyer fails to follow through on the contract without a valid legal reason, their default allows the seller to retain that earnest money as compensation for the inconvenience and potential lost opportunities caused by not being able to sell the property to another buyer during that time.

In many cases, the earnest money serves as a form of liquidated damages, which means that the amount is agreed upon in advance as a fair estimate of the damages that would be incurred due to the buyer defaulting. Thus, the seller may not only rely on this financial compensation to mitigate their losses, but it also serves as a deterrent against buyer defaults.

In contrast, the other outcomes presented are less common in cases of default. Returning earnest money to the buyer would typically occur if the contract was validly canceled or if contingencies were not met, which does not usually reflect a default. The rescinding of a contract directly relates to mutual agreement or specific legal reasons, rather than being an automatic consequence of default. Lastly, stating that the buyer cannot sue for damages would generally be inaccurate,