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

In a real estate transaction, the purpose of earnest money is to demonstrate the buyer's serious intent and commitment to purchasing the property. When a buyer submits earnest money, typically in the form of a deposit held in escrow, it signals to the seller that the buyer is genuine in their offer and is willing to move forward with the transaction. This deposit helps to ensure that the buyer will follow through with the terms outlined in the purchase agreement, as failing to do so generally means forfeiting the earnest money.

By showing this commitment, the buyer not only strengthens their bargaining position but also helps to reassure the seller that they are not just casually making an offer. This can be especially important in competitive markets where multiple offers may be on the table. The sincerity conveyed through earnest money often encourages sellers to negotiate more favorably with serious buyers.

The other options address concepts that are not related to the primary function of earnest money. For instance, securing a loan for the buyer refers to financing aspects, broker's commission pertains to transaction costs, and closing costs involve fees incurred at the final stages of the property transfer. None of these reflect the primary role of earnest money, which is specifically linked to buyer commitment.