Tennessee Realtor State Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

The amount of earnest money is an essential component included in both commercial and residential purchase and sale agreements. Earnest money serves as a deposit made by the buyer to demonstrate their seriousness in purchasing the property. This deposit is typically applied toward the purchase price at closing, signaling the buyer's commitment to following through with the transaction.

In commercial transactions, earnest money deposits can vary significantly in amount, affected by the scale and complexity of the business involved. Similarly, earnest money functions in residential agreements, providing a safeguard for the seller against buyers who may back out of the deal without justification. In both cases, the inclusion of earnest money helps protect the interests of sellers while encouraging buyers to proceed responsibly with the purchase process.

Other elements listed, such as closing dates, property appraisal values, and home warranty options, may also appear in purchase agreements but are not universally applicable to both commercial and residential transactions, making earnest money a key commonality in these types of agreements.