What is the "earnest money deposit" in a real estate transaction?

The earnest money deposit is a specific amount of money that a buyer provides to demonstrate their serious intent to purchase a property. This deposit is typically made when an offer is submitted and shows that the buyer is committed to the transaction. It serves as a form of security for the seller, indicating that the buyer has a vested interest in proceeding with the sale.

The earnest money is usually held in an escrow account and may be applied toward the down payment or closing costs at the time of finalizing the sale. If the transaction does not proceed as agreed upon—due to contingencies outlined in the purchase agreement—the terms of the contract will dictate whether the earnest money is refunded to the buyer or forfeited to the seller. This ultimately underscores the commitment the buyer is making towards following through with the purchase.

In contrast to this, the other options refer to different costs associated with a real estate transaction that do not directly reflect buyer commitment in the same manner. Appraisal fees relate to assessing the property's value, broker fees pertain to the services rendered by real estate agents, and title insurance costs involve protecting against potential ownership disputes—all of which serve different roles than the earnest money deposit.