What is earnest money?

Earnest money is a deposit made to demonstrate a buyer's serious intent to purchase a property. This deposit is usually submitted with an offer to buy real estate and serves as a sign of good faith to the seller, indicating that the buyer is committed to proceeding with the transaction. The earnest money can later be applied to the down payment or closing costs if the sale goes through.

This shows the seller that the buyer is earnest in their intentions and helps to establish trust in the negotiation process. If the transaction falls through due to conditions not favorable for the buyer, they may receive their earnest money back, depending on the contingencies outlined in the purchase agreement.

The other options do not accurately describe earnest money; they refer to different aspects of real estate transactions. For example, fees paid to a real estate agent usually come from the commission at closing, while down payments are generally a larger portion of the loan and are not specifically related to earnest money. Non-refundable fees for property inspections pertain to costs associated with evaluating a property before purchase but do not reflect the intent to buy as earnest money does.