Which of the following best describes "earnest money" in a real estate transaction?

Justifying the definition of "earnest money" as a deposit to show serious intent to purchase is essential for understanding its role in real estate transactions. Earnest money is a sum of money that a buyer submits with their offer to demonstrate to the seller that they are genuinely interested in purchasing the property. This practice helps to indicate to the seller that the buyer is committed to moving forward with the transaction, which can strengthen the buyer's position in negotiations.

When earnest money is placed in an escrow account during the contract period, it assures the seller that the buyer is serious, which can be particularly important in competitive markets. Typically, if the transaction successfully closes, the earnest money is applied toward the purchase price or closing costs. If the transaction fails due to contingencies or other agreed-upon reasons, the buyer may recover their earnest money.

Essentially, earnest money is a critical component in real estate transactions, allowing both parties to engage with more confidence. The other options, while related to the transaction process, do not accurately capture the primary function of earnest money in indicating a buyer's intent and commitment.