How Richmond American Homes Uses This Clause
Richmond American Homes purchase agreements may characterize earnest money deposits as non-refundable upon buyer non-performance. Buyers who fail to close for any reason, including inability to obtain financing through outside lenders after declining HomeAmerican Mortgage, may forfeit their deposits.
This provision can result in the loss of thousands of dollars if the buyer is unable or unwilling to complete the purchase, even when circumstances beyond the buyer's control contribute to the failure to close.
Richmond American Homes's scale as a subsidiary of MDC Holdings 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
Interaction with Affiliated Lender
Buyers who decline to use HomeAmerican Mortgage Corporation and subsequently cannot obtain financing through outside lenders may forfeit their deposit. The incentive structure for using the affiliated lender adds complexity to this provision.
Standard Form Contract
This clause appears in Richmond American Homes'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 Richmond American Homes's use of this clause type.
HomeAmerican Mortgage Corporation — CFPB Settlement
HomeAmerican Mortgage Corporation, the affiliated lender of MDC Holdings, settled with the CFPB over allegations related to affiliated business arrangement disclosures and referral practices. The settlement addressed concerns about the relationship between the builder's homebuilding and mortgage operations.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects Richmond American Homes's operating states.
| State | Status | Note |
|---|---|---|
| Colorado | Likely Enforceable | Deposit forfeiture clauses in Colorado new construction contracts are likely enforceable as liquidated damages provisions, provided the amount is reasonable and not punitive. |
| Arizona | Likely Enforceable | Deposit forfeiture clauses in Arizona new construction contracts are likely enforceable as liquidated damages provisions. |
| Nevada | Likely Enforceable | Deposit forfeiture clauses in Nevada new construction contracts are likely enforceable as liquidated damages provisions. |
| California | Uncertain | California imposes specific limits on liquidated damages in residential purchase contracts (Civil Code section 1675). Deposit forfeiture amounts exceeding 3% of the purchase price may face enforceability challenges. |
| Oregon | Likely Enforceable | Deposit forfeiture clauses in Oregon new construction contracts are likely enforceable as liquidated damages provisions, provided the amount is reasonable. |
| Washington | Likely Enforceable | Deposit forfeiture clauses in Washington new construction contracts are likely enforceable as liquidated damages provisions. |
| Utah | Likely Enforceable | Deposit forfeiture clauses in Utah new construction contracts are likely enforceable as liquidated damages provisions. |
| Idaho | Likely Enforceable | Deposit forfeiture clauses in Idaho new construction contracts are likely enforceable as liquidated damages provisions. |
| Florida | Likely Enforceable | Deposit forfeiture clauses in Florida new construction contracts are likely enforceable as liquidated damages provisions, though Florida courts will scrutinize whether the amount is a reasonable pre-estimate of damages. |
| Maryland | Likely Enforceable | Deposit forfeiture clauses in Maryland new construction contracts are likely enforceable as liquidated damages provisions, provided the amount is reasonable. |
| Virginia | Likely Enforceable | Deposit forfeiture clauses in Virginia new construction contracts are likely enforceable as liquidated damages provisions. |
Related Clauses in Richmond American Homes Contracts
This clause often works in combination with other provisions in Richmond American Homes's purchase agreements.
Disputes over deposit forfeiture must be resolved through arbitration, where the cost of pursuing a claim may exceed the deposit amount.
Daily closing penalties may accumulate alongside deposit forfeiture, compounding the buyer's financial exposure.
The liability limitation may affect the buyer's ability to recover forfeited deposits in the event of builder non-performance.
What Buyers Can Do
- Understand the deposit forfeiture terms before signing. Know the exact circumstances under which your deposit becomes non-refundable. Pay particular attention to financing contingencies and how the use of HomeAmerican Mortgage affects your deposit rights.
- Secure financing pre-approval before signing the contract. Obtain a pre-approval letter from your chosen lender — whether HomeAmerican Mortgage or an outside lender — before committing your earnest money. This reduces the risk of forfeiture due to financing failure.
- Know your state's consumer protection statutes. Some states, including California, impose specific limits on deposit forfeiture amounts. Understand whether your state's laws provide additional protections beyond the contract terms.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in Richmond American contracts that collectively limit buyer remedies. A contract scan can identify all of them.