What type of deposit shows a buyer's good faith in a transaction?

What type of deposit shows a buyer's good faith in a transaction?

• A. Earnest Money
• B. Good Faith Deposit
• C. Security Deposit
• D. Commitment Fee

Answer: (A)

An earnest money deposit is a sum of money provided by a buyer to demonstrate their serious intent in pursuing a purchase agreement for a property. This deposit reassures the seller that the buyer is committed to completing the transaction. Typically, the amount is held in a trust account and is applied toward the buyer's down payment or closing costs if the transaction proceeds. If the transaction falls through due to reasons defined in the purchase agreement, the earnest money may be returned to the buyer or forfeited to the seller, depending on the circumstances. This practice not only solidifies the buyer's commitment but also serves as a signal to the seller that the buyer is serious and reduces the likelihood of frivolous offers. Other types of deposits, like a good faith deposit or security deposit, may serve different purposes within real estate transactions but do not specifically convey the same level of commitment as earnest money does.

An earnest money deposit is a sum of money provided by a buyer to demonstrate their serious intent in pursuing a purchase agreement for a property. This deposit reassures the seller that the buyer is committed to completing the transaction. Typically, the amount is held in a trust account and is applied toward the buyer's down payment or closing costs if the transaction proceeds. If the transaction falls through due to reasons defined in the purchase agreement, the earnest money may be returned to the buyer or forfeited to the seller, depending on the circumstances.

This practice not only solidifies the buyer's commitment but also serves as a signal to the seller that the buyer is serious and reduces the likelihood of frivolous offers. Other types of deposits, like a good faith deposit or security deposit, may serve different purposes within real estate transactions but do not specifically convey the same level of commitment as earnest money does.