What is the primary purpose of a binder in real estate?

The primary purpose of a binder in real estate is to provide an initial security for the property. A binder is typically a preliminary agreement between a buyer and a seller that outlines the basic terms of the sale and often includes a deposit or earnest money. This initial deposit demonstrates the buyer's serious intent to purchase the property and helps secure the seller's commitment to the sale while the parties move toward finalizing the formal contract.

In this context, the binder serves a crucial function in the transaction process by indicating that the buyer is genuinely interested, which can help prevent other offers from being considered while the details are finalized. This initial security plays an important role in binding the parties informally until more comprehensive agreements are reached and ensures that both parties uphold their preliminary commitments.