Final answer:
A broker must deposit earnest money into an escrow account within a specific timeframe after the offer is accepted. This protects both the buyer and seller in a real estate transaction.
Step-by-step explanation:
When a broker receives earnest money, they are required to deposit it into an escrow account within a specific timeframe. The timing of the deposit varies depending on state laws and real estate regulations, but it is typically done within a few days to a week after the offer is accepted.
This deposit serves as a show of good faith by the buyer and is often a percentage of the purchase price. It demonstrates the buyer's commitment to the transaction and protects the seller in case the buyer backs out without a valid reason.
By depositing the earnest money, the broker ensures that it is held securely until the completion of the transaction. If the deal goes through, the money is usually applied towards the down payment or closing costs. If the deal falls through, the money may be returned to the buyer or used to compensate the seller for their time and expenses.