Which of the following best describes an earnest money deposit?

Which of the following best describes an earnest money deposit?

• A. A fee paid to the agent for services rendered
• B. A security deposit to safeguard the buyer's interest in a property
• C. A cash payment that shows the buyer's serious intent to purchase
• D. A cost related to the appraisal process

Answer: (C)

An earnest money deposit is primarily defined as a cash payment made by a buyer to demonstrate their serious intent to purchase a property. This deposit is typically submitted with an offer to purchase and serves as a good faith gesture indicating that the buyer is committed to following through with the transaction. By placing this deposit, the buyer reassures the seller that they are serious about the offer, which can help strengthen the buyer's negotiating position and potentially influence the seller's decision. This deposit is usually held in escrow and may be applied toward the buyer's closing costs or purchase price at the closing of the transaction. The earnest money can be forfeited to the seller if the buyer backs out of the deal without a valid reason as defined in the purchase agreement, which further signifies its role in protecting the seller's interests while ensuring that buyers are earnest in their intentions.

An earnest money deposit is primarily defined as a cash payment made by a buyer to demonstrate their serious intent to purchase a property. This deposit is typically submitted with an offer to purchase and serves as a good faith gesture indicating that the buyer is committed to following through with the transaction. By placing this deposit, the buyer reassures the seller that they are serious about the offer, which can help strengthen the buyer's negotiating position and potentially influence the seller's decision.

This deposit is usually held in escrow and may be applied toward the buyer's closing costs or purchase price at the closing of the transaction. The earnest money can be forfeited to the seller if the buyer backs out of the deal without a valid reason as defined in the purchase agreement, which further signifies its role in protecting the seller's interests while ensuring that buyers are earnest in their intentions.