On a settlement statement, an earnest money deposit that will be held by the brokerage firm until closing is a:

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Study for the Washington Real Estate Fundamentals Rockwell Exam. Utilize flashcards, multiple choice questions with hints and explanations. Prepare thoroughly for your real estate career!

Multiple Choice

On a settlement statement, an earnest money deposit that will be held by the brokerage firm until closing is a:

Explanation:
Earnest money is the buyer’s deposit held in escrow to show good faith. Since the buyer has already paid this money and it will be applied toward the purchase price at closing, it appears as a credit to the buyer on the settlement statement. This credit reduces the amount the buyer must bring to closing. It isn’t a debit to the buyer, because it doesn’t increase the cash the buyer needs at closing, and it isn’t a credit to the seller, since the funds are still the buyer’s in escrow and are applied to the purchase price rather than paid to the seller.

Earnest money is the buyer’s deposit held in escrow to show good faith. Since the buyer has already paid this money and it will be applied toward the purchase price at closing, it appears as a credit to the buyer on the settlement statement. This credit reduces the amount the buyer must bring to closing. It isn’t a debit to the buyer, because it doesn’t increase the cash the buyer needs at closing, and it isn’t a credit to the seller, since the funds are still the buyer’s in escrow and are applied to the purchase price rather than paid to the seller.

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