Minnesota State Real Estate Practice Test 2025 – Comprehensive All-in-One Guide for Exam Success

An earnest money deposit is a sum of money given by a buyer to demonstrate their serious intent to purchase a home. This deposit is typically submitted along with an offer to purchase and serves as a sign of good faith, indicating that the buyer is committed to going through with the transaction if their offer is accepted. The earnest money is often held in an escrow account until the transaction is finalized.

This deposit is significant because it provides some financial security to the seller while also motivating the buyer to proceed diligently with the transaction. If the sale goes through, the earnest money is generally applied toward the buyer’s down payment or closing costs. However, it is important to note that if the buyer backs out of the sale without a valid reason outlined in the purchase agreement, they may forfeit the earnest money to the seller.

In contrast, the other options do not accurately define what an earnest money deposit is. Fees paid to a real estate agent are separate transactional costs, deposits for rental properties pertain to different agreements, and payments to cover closing costs are distinct and separate from earnest money deposits.