When is earnest money typically paid during a real estate transaction?

In a real estate transaction, earnest money is typically paid when a buyer submits an offer on a property. This payment serves as a demonstration of the buyer’s good faith and serious intent to proceed with the purchase. By providing earnest money, the buyer reassures the seller that they are committed to the transaction, and it can also help to secure the property while the offer is being considered. The earnest money is usually held in escrow until the sale is finalized, at which point it is often applied to the buyer's down payment or closing costs.

The timing of the earnest money payment is crucial, as it helps establish a trust relationship between the buyer and seller early in the process. It is not paid at the time of listing the property, at closing, or after the home inspection; these moments in the transaction serve different purposes and involve different contractual obligations.