A buyer's earnest money deposit that is held by a broker until settlement will be listed on the closing statement as

Rationale

Credit to the buyer.

The earnest money deposit is money provided by the buyer to demonstrate their commitment to the purchase, and it is credited to the buyer's account on the closing statement at settlement. This credit effectively reduces the amount of cash the buyer needs to bring to the closing.

A (credit to the buyer) CORRECT

This is the correct answer because the earnest money deposit is applied as a credit against the purchase price at closing. It offsets the total amount the buyer must pay, ensuring that the buyer's initial deposit is accounted for in the final settlement statement.

B (credit to the seller) YOUR ANSWER

This choice is incorrect because the earnest money deposit does not directly benefit the seller until the closing occurs. It serves as a security for the transaction, but it is ultimately credited to the buyer, not the seller, on the closing statement.

C (debit (charge) to the buyer) YOUR ANSWER

This option is wrong since a debit represents an amount that the buyer owes at closing. The earnest money deposit is not an additional cost but rather a prepayment that is credited to the buyer, thereby reducing their overall cash requirement at closing.

D (debit (charge) to the seller) YOUR ANSWER

This choice is also incorrect because the earnest money deposit does not represent a charge to the seller. Instead, it is an amount the buyer has already put down, which is credited to them rather than causing any debit to the seller’s account.

Conclusion

In real estate transactions, the earnest money deposit acts as a good faith gesture from the buyer. It is credited to the buyer on the closing statement, reducing their final payment amount. Understanding how earnest money is treated in the closing process is crucial for buyers and sellers alike, as it ensures clarity in the financial aspects of the transaction.

A buyer's earnest money deposit that is held by a broker until settlement will be listed on the closing statement as

Credit to the buyer.

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