In the Henry–Susan transaction, what was the binder deposit Henry provided?

• A. 1000
• B. 5000
• C. 2000
• D. 7500

Answer: (B)

Earnest money, or binder deposit, is money a buyer puts down to demonstrate serious intent to purchase and to secure the contract. In the Henry–Susan transaction, the binder deposit was five thousand dollars. This funds is held in the broker’s trust account and is applied toward the buyer’s total at closing. It acts as a safeguard for the seller that the buyer will follow through; if the buyer fulfills all contract conditions and closes, it becomes part of the buyer’s funds at settlement. If the buyer breaches and the contract allows it, the seller may be entitled to keep the deposit as liquidated damages; if the contract or circumstances lead to a return of funds, the deposit is returned.