Earnest money is typically held in which type of account?

Earnest money is typically held in a separate escrow account because this type of account is specifically designed to securely hold funds on behalf of the parties involved in a transaction until certain conditions are met. Escrow accounts provide assurance that the funds will be used in accordance with the terms of the agreement, such as finalizing a real estate transaction. Holding earnest money in a separate escrow account helps to protect the interests of both the buyer and seller and ensures that the funds are managed in a neutral, third-party capacity until they can be appropriately disbursed. This practice is a standard in real estate transactions, reinforcing the trust and transparency necessary for both parties.