Which party typically holds the earnest money deposit in a real estate transaction?

In a real estate transaction, the earnest money deposit is typically held by the escrow agent. This third-party entity plays a crucial role in the transaction by ensuring that the funds are securely managed until the terms of the purchase agreement are fulfilled. The escrow agent acts as a neutral intermediary, which helps protect both the buyer and seller throughout the process. By holding the earnest money, the escrow agent ensures that the funds are available upon successful completion of the sale, while also providing a level of assurance to the seller that the buyer is committed to the transaction.

The other parties involved in the transaction do not typically hold the earnest money deposit. The seller might be entitled to receive the deposit upon a failed transaction under certain conditions, but they do not custody the funds. The listing agent, while they may facilitate the transaction, also does not hold the earnest money; the responsibility lies with the escrow agent to manage this type of financial transaction. The buyer provides the deposit as a sign of good faith, but it is held in trust by the escrow agent rather than by the buyer themselves.