How KB Home Uses This Clause
KB Home purchase agreements have been documented to include deposit forfeiture / earnest money trap provisions. KB Home's purchase agreement typically provides a short opt-out window (often 7 days), after which the earnest money deposit may be forfeited if the buyer cancels. The specific terms of cancellation and refund eligibility are governed by the contract language, which is drafted by the builder's attorneys. This clause has been the subject of litigation, including Homesafe Escrow Class Action Settlement.
This provision typically appears within the purchase agreement alongside other terms that may limit buyer remedies. Because KB Home operates across multiple states, the enforceability and practical impact of this clause varies depending on where the home is located.
KB Home's scale means contract templates are largely standardized across its operations. A clause identified in one market's contract is likely present in other markets' contracts, though local addenda may modify the terms.
Builder-Specific Details
Combined with Mandatory Arbitration
Deposit disputes must go through arbitration, where the cost may approach or exceed the deposit itself.
Regional Contract Patterns
KB Home operates in a more focused geographic footprint. Contract terms may vary somewhat between markets, but documented patterns tend to be consistent across the builder's operating states.
Standard Form Contract
This clause appears in KB Home's standard purchase agreement, which is generally presented on a take-it-or-leave-it basis. Buyers typically have limited ability to negotiate individual terms, though making the request in writing is still advisable.
Legal History
The following cases involve KB Home's use of this clause type.
Homesafe Escrow Class Action Settlement
A class action against KB Home's then-subsidiary Homesafe Escrow Co. resulted in a $7.1 million settlement. Plaintiffs alleged they were promised interest on house deposits that they never received and that Homesafe had unlawfully provided and charged for escrow services.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects KB Home's operating states.
| State | Status | Note |
|---|---|---|
| Texas | Likely Enforceable | Deposit forfeiture clauses in new construction contracts are generally enforceable in Texas when... |
| California | Likely Enforceable | California has one of the most detailed statutory frameworks governing liquidated damages in... |
| Arizona | Likely Enforceable | Arizona courts enforce deposit forfeiture clauses as liquidated damages when the amount is... |
| Nevada | Likely Enforceable | Nevada courts enforce liquidated damages provisions when the amount is reasonable relative to... |
| Colorado | Likely Enforceable | Colorado courts enforce liquidated damages clauses, including deposit forfeiture provisions, when... |
| North Carolina | Likely Enforceable | North Carolina courts enforce liquidated damages provisions, including deposit forfeiture in new... |
| Florida | Likely Enforceable | Florida courts generally enforce deposit forfeiture provisions in new construction contracts when... |
| Washington | Likely Enforceable | Washington courts enforce liquidated damages provisions when the amount is reasonable relative to... |
| Idaho | Likely Enforceable | Idaho courts enforce liquidated damages provisions when the amount is a reasonable estimate of... |
Related Clauses in KB Home Contracts
This clause often works in combination with other provisions in KB Home's purchase agreements.
Deposit disputes must go through arbitration, where the cost may approach or exceed the deposit itself.
Incentives tied to using the preferred lender may be lost if the buyer switches lenders, and the deposit terms may reflect this.
Closing penalties can create pressure to close quickly, and failure to close may trigger deposit forfeiture.
What Buyers Can Do
- Understand exactly when your deposit becomes non-refundable. The contract may specify triggers that make the deposit non-refundable before you expect. Read the forfeiture conditions carefully.
- Know the cancellation provisions. Review what happens to your earnest money if you need to cancel. KB Home's contract may allow deposit retention even in circumstances beyond your control.
- Review the Homesafe Escrow Class Action Settlement case. The Homesafe Escrow Class Action Settlement ruling may be relevant to your situation. If you are buying a KB Home home in a state with similar legal protections, this precedent could affect the enforceability of this clause.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in KB Home contracts that collectively limit buyer remedies. A contract scan can identify all of them.