What is earnest money in the context of real estate transactions?

Earnest money is a deposit made by a buyer to show their serious intent to purchase a property. This amount is typically held in an escrow account and serves as a good faith gesture to reassure the seller that the buyer is committed to completing the transaction. If the sale goes through, the earnest money is usually applied to the buyer's down payment or closing costs.

In real estate negotiations, earnest money can help prevent frivolous offers and can strengthen a buyer's position in a competitive market. It also provides the seller with some reassurance that the buyer is not just casually looking but is genuinely interested in moving forward with the purchase.

This concept is distinct from other options provided: fees paid to a real estate agent, charges for inspections, and loan amounts for financing are all separate financial aspects of a real estate transaction that do not directly pertain to the buyer’s commitment to purchase a property.