What is a deposit in a purchase agreement?

• A. Monetary deposit must accompany the purchase agreement either in the form of earnest money or the specific performance contract
• B. A loan from the bank
• C. A title insurance policy
• D. A survey fee

Answer: (A)

A deposit in a purchase agreement is money the buyer puts down when signing to show they are serious and to secure the deal. This is usually called earnest money or a good-faith deposit and is typically held in escrow until closing. The deposit is then credited toward the purchase price at closing if the buyer meets the contract terms. If the buyer breaches, the seller may keep the deposit as liquidated damages according to the contract; if the seller breaches, the buyer generally gets the deposit back and may seek further remedies. This is different from financing (a loan from the bank), which is separate funding for the purchase, and from costs like title insurance or a survey fee, which are closing-related costs and protections rather than a security payment for the contract.