When is earnest money deposited in a trust account?

The correct answer is that earnest money is deposited in a trust account upon acceptance of the offer. This is an important step in the real estate transaction process because it signifies the buyer's commitment to following through with the purchase of the property. Until the offer is formally accepted by the seller, the earnest money does not have a binding effect on the transaction.

When a buyer submits an offer to purchase a property, including earnest money, the seller must review and accept that offer for the deposit to be considered valid. Once the offer is accepted, the earnest money is typically deposited into a trust account, often held by the real estate broker, to ensure that the funds are secure and properly accounted for until the transaction is completed or the buyer withdraws from the deal under the terms specified in the contract.

Depositing earnest money before listing the property or after closing does not align with standard practices in real estate transactions. Therefore, the timing of the deposit is crucial, as it is tied to the acceptance of the offer and serves to protect the interests of both buyer and seller throughout the negotiation process.