What is the primary purpose of an earnest money deposit?

The primary purpose of an earnest money deposit is to secure a real estate purchase and demonstrate the buyer's intent to proceed with the transaction. This deposit acts as a form of assurance to the seller that the buyer is serious about their offer, which can help differentiate them from other potential buyers. By submitting earnest money, the buyer shows commitment to the purchase, indicating they are not just casually exploring options but have a genuine intention to complete the sale.

Earnest money typically goes into an escrow account and is applied to the buyer's closing costs or down payment at settlement, provided that the transaction progresses as agreed upon in the purchase contract. If the deal falls through due to contingencies specified in the contract, such as financing issues or unsatisfactory inspections, the buyer may be entitled to a refund of their earnest money. However, if the buyer backs out for reasons not covered by the contingencies, the seller may keep the deposit as compensation for taking the property off the market.

The other options do not accurately reflect the primary purpose of the earnest money deposit. While closing costs and broker fees are important aspects of a real estate transaction, they are not the function of the earnest money itself. Similarly, covering potential damages during showings is not connected to the intent of