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The ins and outs of 'liquidated damages'

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DEAR BERNICE: We are buying our first home in California. Prices have finally come down to where we can afford them. Our agent asked us to review the purchase agreement now so that we wouldn't feel rushed when we are ready to write an offer. One of the provisions called for "liquidated damages." I've never heard of that before. Is this something we should agree to? --Sam K. DEAR SAM: Congratulations on buying your first home. The "liquidated damages" provision allows the buyer and the seller to agree in advance as to the amount of damages that will be paid in the event of a breach to buy or sell real property. There are quite a few states that don't have this provision in their standard purchase contracts. In California, however, the liquidated damages provision is commonly used in residential purchases and is limited to 3 percent of the sales price. I can't give you legal advice as to whether this is a good idea for you or not. Nevertheless, I can shar...