Earnest money is a deposit paid—often into an escrow account—to show a good-faith intention to complete a transaction—often a transaction for the purchase of real property (real estate).

If the prospective buyer defaults and fails to complete the transaction for the purchase of the real property (fails to close) the earnest money is usually forfeited and delivered to the would-be seller under the terms of the contract or agreement for the sale of the property.

Earnest money is generally not required for a valid contract for the purchase and sale of real property, but is often included to compensate the prospective seller for time and potential missed sales opportunities while the sale was “under contract” with the prospective buyer.

Earnest money may also be referred to as earnest; bargain money; caution money; hand money; or down payment.

In Arizona, earnest money is a deposit made by a prospective buyer to demonstrate their serious intent to complete a real estate transaction. It is typically held in an escrow account during the period the property is under contract. While earnest money is not legally required to make a real estate contract valid, it is a common practice to provide assurance to the seller. If the buyer defaults on the agreement and fails to close the transaction without a legally valid reason, the earnest money is usually forfeited to the seller, according to the terms outlined in the purchase agreement. The specific conditions under which earnest money may be forfeited or returned are typically detailed in the purchase contract, and Arizona state statutes and case law would govern disputes over earnest money. It's important for both buyers and sellers to clearly understand the terms of the contract regarding earnest money and to consult with an attorney if they have questions about their rights and obligations.