What is earnest money?

Earnest money is a deposit made by a buyer to show their serious intent and commitment to purchasing a property. This money serves as a gesture of good faith, indicating that the buyer is seriously considering the transaction and intends to follow through. Typically, earnest money is submitted along with a purchase offer and demonstrates to the seller that the buyer is genuine in their interest, which can help in negotiations, especially in competitive markets.

The amount of earnest money can vary based on the purchase price and local practices, but it is often held in an escrow account until the transaction is completed. If the deal goes through, this deposit is commonly applied towards the buyer's down payment or closing costs. Should the buyer back out without a valid reason, the seller may be entitled to keep the earnest money as compensation for taking the property off the market.

The other options do not accurately define earnest money. For instance, the registration cost of a property, fees for broker services, and final payments before closing represent different financial aspects of real estate transactions, but they do not capture the essence of what earnest money is and its purpose in the buying process.