Hawaii Pre-Licensing National Practice Exam

With the exception of court-ordered sales, who determines the amount of earnest money to be deposited by a prospective buyer?

1. The law

2. The real estate agent

3. Agreement between the seller and the buyer

4. The buyer's lender

The correct answer is: Agreement between the seller and the buyer

The determination of the amount of earnest money to be deposited by a prospective buyer primarily arises from the agreement reached between the seller and the buyer. Earnest money serves as a sign of good faith from the buyer, showing their commitment to purchasing the property. This amount can vary based on negotiations, local market conditions, and the specific circumstances surrounding the transaction. In many cases, earnest money is influenced by factors such as the overall price of the property, the competitiveness of the market, and the buyer's financial situation. Since this amount is part of the negotiations, both parties have the flexibility to agree on a figure that reflects their mutual understanding and interests. While a real estate agent may provide guidance or suggest customary amounts based on local practices, it is ultimately the negotiation between the buyer and seller that solidifies the earnest money figure. Moreover, the law does not dictate a specific amount, and the lender typically does not set the earnest money; rather, it is a decision made directly between the buyer and seller in their negotiation process.