Which term describes the forfeiture of a buyer's deposit if they do not proceed with the deal?

The correct term that describes the forfeiture of a buyer's deposit if they do not proceed with the deal is “liquidated damages.” In real estate transactions, liquidated damages refer specifically to an agreement made by both parties that defines the consequences or compensation for a party’s failure to meet the terms of a contract. In the context of a purchase and sale agreement, if a buyer backs out, they may lose their deposit as a pre-agreed form of compensation for the seller’s potential losses caused by the buyer’s breach.

In contrast, earnest money is a deposit made by a buyer to demonstrate their commitment to the purchase, and it is typically held in trust until closing. The term "forfeiture" simply describes the act of losing or giving up a right, which is a part of the liquidated damages concept but does not encapsulate the legal arrangement understood within real estate transactions. A withdrawn offer refers to a situation where the buyer rescinds their offer without any penalties or implications for the deposit, which does not imply forfeiture as a consequence.

Therefore, “liquidated damages” clearly and correctly captures the situation where a buyer loses their deposit as a pre-determined penalty for not following through with the deal.