Wisconsin Real Estate Sales Practice Exam

Which of the following items can typically NOT be held as earnest money?

1. Cash deposits

2. Personal property, like a painting

3. Checks

4. Bank guarantees

The correct answer is: Personal property, like a painting

The choice indicating that personal property, like a painting, cannot typically be held as earnest money is based on the fundamental nature and purpose of earnest money in real estate transactions. Earnest money serves as a financial commitment from the buyer to show serious intent to proceed with the purchase of a property. It is generally expected to be in a form that is easily liquidated or can quickly be used as a deposit towards the purchase price. Cash deposits, checks, and bank guarantees are all financial instruments that can be readily converted to cash or used directly in the transaction, thereby fulfilling the earnest money requirement. In contrast, personal property like a painting does not fit this criterion. While it has value, it cannot be immediately converted into cash or directly applied as earnest money in the same manner that cash or checks can. This distinguishes personal property from the types of earnest money typically accepted in transactions.