What is the key purpose of earnest money in a real estate transaction?

The key purpose of earnest money in a real estate transaction is to serve as a deposit indicating the buyer's serious intent to purchase the property. This financial commitment assures the seller that the buyer is genuinely interested and willing to follow through with the purchase. By providing earnest money, the buyer demonstrates good faith and a strong intention to enter into a contractual agreement.

When a buyer makes an offer on a property, including earnest money can make the offer more attractive to the seller, as it indicates a lower risk of the deal falling through. Typically, this deposit is held in trust or escrow and is applied toward the buyer's down payment or closing costs once the transaction is completed.

The other options focus on aspects of the transaction that do not align with the primary purpose of earnest money. For instance, closing costs are fees incurred at the closing of a real estate transaction, repairs on the property are typically the seller's responsibility unless agreed otherwise, and real estate agent commissions are separate negotiations unrelated to a buyer's earnest money deposit. Hence, the essence of earnest money lies in its role as a symbol of the buyer's commitment to the purchase.