§22.2 - Use of a Real Estate Contract as a Financing Device

• Jurisdiction: Washington

§22.2 USE OF A REAL ESTATE CONTRACT AS A FINANCING DEVICE

A real estate contract, as noted above, is similar in form to the early common law mortgage and is used as a financing device.

(1) Distinguishing between an earnest money contract and a real estate contract

The doctrine governing the relationship between the parties to a real estate contract is sometimes applied indiscriminately to earnest money agreements without any sensitivity to the agreements served. The forfeiture rules, for example, should be applied only to contracts serving a financing function because the installment buyer is likely to have a more substantial equity in the property. Also, the typical earnest money contract is likely to have a liquidated damages clause that can be evaluated in...