Why might a buyer provide earnest money?

A buyer provides earnest money primarily to secure their interest in the property. By making this deposit, which shows good faith, the buyer indicates to the seller that they are serious about purchasing the property. This commitment can help differentiate the buyer in a competitive market, where multiple offers may be on the table. Earnest money acts as a security for the seller, demonstrating that the buyer is genuine and intends to follow through with the transaction.

In addition, this financial commitment can convey the buyer's confidence and reliability, enhancing their negotiating position. If the transaction proceeds to closing, the earnest money is typically applied toward the down payment or closing costs. However, if the buyer backs out without a valid reason outlined in the purchase agreement, they may risk losing their earnest money to the seller.