Who typically holds the down payment in a real estate transaction?

In a real estate transaction, the seller's attorney typically holds the down payment, which is also referred to as earnest money. This practice is part of safeguarding the funds during the transaction process. The earnest money indicates the buyer's serious intent to purchase the property and serves as a form of security for the seller while the deal is being finalized.

Holding the down payment in this manner is crucial as it ensures that the funds are managed by a neutral party until the transaction is complete. The seller's attorney is responsible for disbursing those funds according to the terms outlined in the purchase agreement, which could include applying the amount toward the purchase price, returning it to the buyer if specific contingencies are not met, or possibly retaining it under specific conditions, such as if the buyer defaults.

By contrast, the other parties, such as the buyer's attorney, real estate agent, or lender, typically do not hold the down payment as their primary role in the transaction does not include managing earnest money. The buyer’s attorney focuses on protecting the buyer’s interests, the real estate agent facilitates the transaction, and the lender evaluates and likely oversees the financing aspect, rather than the holding of funds involved in the transaction.