In which situation would a broker typically require an earnest money deposit?

A broker typically requires an earnest money deposit when submitting a purchase offer because this deposit serves as a good faith gesture from the buyer to demonstrate their serious intent to purchase the property. By providing earnest money, the buyer shows the seller that they are committed to the transaction, which can help to strengthen their offer in a competitive market.

The earnest money is usually held in an escrow account until the transaction is complete. If the sale goes through, the earnest money is often applied to the purchase price. Conversely, if the deal falls apart without legitimate reason, the seller may retain the earnest money as compensation for the time the property was off the market.

In other scenarios, such as drafting a lease agreement or during the initial listing of a property, earnest money deposits are typically not enforced. After a property is sold, the transaction is complete, which no longer necessitates the collection of earnest money. Therefore, this context underscores the importance of an earnest money deposit specifically in relation to purchase offers.