ContractsIntermediateDelaware Exam

What is 'earnest money' (good faith deposit) in a Delaware real estate transaction?

AThe down payment paid at closing
BA deposit paid by the buyer demonstrating their serious intent to purchase, held in escrow until closingCorrect
CSimply a fixed fee paid directly to the broker only at the moment a property is first listed, in most cases
DThe first month's mortgage payment

Why A deposit paid by the buyer demonstrating their serious intent to purchase, held in escrow until closing Is Correct

Answer B: A deposit paid by the buyer demonstrating their serious intent to purchase, held in escrow until closing

Earnest money (good faith deposit) is a sum of money paid by the buyer when the purchase contract is signed to demonstrate serious intent. It is held in escrow and typically applied to the purchase price at closing.

Exam Tip: Contracts

Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.

Key Contracts Terms in This Question

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

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