Which statement about earnest money is most accurate?

Which statement about earnest money is most accurate?

• A. It guarantees loan approval
• B. It reduces closing costs for the buyer
• C. It demonstrates the buyer's seriousness about the purchase
• D. It must be paid in full at signing

Answer: (C)

Earnest money is a good-faith deposit that signals the buyer’s serious intent to follow through with the purchase. It isn’t a guarantee of loan approval and it doesn’t automatically reduce closing costs on its own. The funds are usually placed in escrow after the contract is accepted and are applied toward the purchase price at closing (often toward the down payment or other closing costs). If the buyer completes the transaction, the earnest money is credited at closing; if the buyer breaches outside the contract terms, the seller may keep it as damages, while if the seller breaches, the buyer would get it back. The amount and timing vary, and it does not have to be paid in full at signing.

Earnest money is a good-faith deposit that signals the buyer’s serious intent to follow through with the purchase. It isn’t a guarantee of loan approval and it doesn’t automatically reduce closing costs on its own. The funds are usually placed in escrow after the contract is accepted and are applied toward the purchase price at closing (often toward the down payment or other closing costs). If the buyer completes the transaction, the earnest money is credited at closing; if the buyer breaches outside the contract terms, the seller may keep it as damages, while if the seller breaches, the buyer would get it back. The amount and timing vary, and it does not have to be paid in full at signing.