Which party is generally required to provide an earnest money deposit?

In a typical real estate transaction, the buyer is generally the party required to provide an earnest money deposit. This deposit serves as a good faith gesture that signifies the buyer's serious intent to purchase the property. It demonstrates to the seller that the buyer is committed to following through with the transaction, helping to establish trust between the parties.

The earnest money is usually held in escrow by a third party until closing, and it may be applied toward the purchase price or used for closing costs. If the buyer ultimately decides to back out of the deal without a valid reason stipulated in the contract, the seller may be entitled to keep the earnest money as compensation for the lost opportunity and potential damages incurred during the negotiation and transaction process.

This practice is a common element in many real estate contracts, emphasizing the notion that earnest money is intended to protect the interests of the seller while also securing the buyer’s position in the transaction.