Which statement about deposits accompanying a purchase agreement is true?

• A. A monetary deposit must accompany the purchase agreement either in the form of earnest money contract or the specific performance contract
• B. The deposit is optional
• C. The deposit is always held by the buyer
• D. The deposit must be paid at closing

Answer: (A)

When a buyer makes an offer to purchase real estate, a monetary deposit—often called earnest money—accompanies the purchase agreement. This deposit shows serious intent and provides the seller with security that the buyer is committed to the deal. It is typically placed into escrow (held by a broker or an escrow/title company) and credited toward the purchase price at closing, assuming the deal goes to closing and contingencies are satisfied. It is not something the buyer pays at closing, and it is not optional in a typical agreement. The idea captured here is that some form of deposited funds accompanies the purchase agreement to bind the buyer and protect the seller, which is why this option is considered correct. If the deal falls through for allowed reasons, the deposit is returned or released per the contract’s contingencies; if the buyer breaches outside those contingencies, the deposit can be forfeited to the seller.