What role does earnest money play in a real estate transaction?

Earnest money serves as a demonstration of the buyer's serious intent to purchase a property. By providing this deposit, the buyer signals to the seller that they are committed to completing the transaction, which can help strengthen their offer in a competitive market. This deposit is typically held in escrow and is applied towards the down payment or closing costs whenever the sale goes through. Should the sale not proceed due to contingencies that are part of the contract, the earnest money may be returned to the buyer. However, if the buyer backs out without a valid reason, they may forfeit the earnest money to the seller. This practice helps establish trust and provides security for the seller that the buyer is earnest about their offer.

In contrast, the other options do not accurately describe the role of earnest money. It does not secure a loan for the buyer, serve as a fee to the real estate agent, or guarantee the seller's acceptance of an offer. The acceptance of the offer is contingent on the seller's willingness to negotiate and agree to the terms presented, independent of the earnest money.