When is an earnest money deposit typically required?

An earnest money deposit is typically required when the offer is accepted by the seller as this demonstrates the buyer's serious intent to purchase the property. Once the seller agrees to the terms of the offer, the buyer submits the deposit as a gesture of good faith and to secure the deal. This deposit is usually held in escrow and can be used towards the down payment or closing costs if the transaction proceeds smoothly.

Understanding this timing is crucial in real estate transactions, as it marks the transition from negotiation to a binding agreement, creating a commitment from the buyer to follow through with the purchase. The earnest money helps protect the seller in case the buyer backs out without a valid reason, as it can be forfeited under certain circumstances.

The other options presented do not accurately reflect the standard practice surrounding earnest money deposits. For instance, a lease agreement does not generally involve an earnest money deposit in the same context as a purchase agreement, and a home inspection typically occurs after an offer is accepted, not before the earnest money is submitted. Also, offering an earnest deposit prior to the offer being conveyed is generally not practiced, as the deposit aligns with the acceptance of the offer.