In a real estate transaction, earnest money serves as a good faith deposit from the buyer to indicate their commitment to purchasing the property. When a transaction successfully closes, the brokerage typically has specific protocols regarding how the earnest money should be handled.
Retaining the earnest money as commission can occur only if it is agreed upon in the terms of the contract, and certain conditions are met, such as the buyer not fulfilling their obligations. If the transaction proceeds to closing, the earnest money often gets applied towards the buyer's down payment or closing costs, rather than being retained by the brokerage as a commission.
In transactions that do not close, the earnest money could be subject to dispute between the buyer and seller, so it's not appropriate for the brokerage to simply retain it as their commission under standard circumstances.
Understanding the protocols for handling earnest money is crucial in real estate transactions, particularly in ensuring that all parties are aligned with the terms agreed upon in the purchase agreement.