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 Connecticut, earnest money is a deposit made by a prospective buyer to demonstrate their serious intent to purchase real estate. This deposit is typically held in an escrow account during the period leading up to the closing of the transaction. While earnest money is not a legal requirement for a real estate contract to be valid in Connecticut, it is a common practice to provide assurance to the seller. If the buyer defaults and does not complete the purchase, the earnest money is usually forfeited according to the terms outlined in the purchase agreement, compensating the seller for the time the property was off the market. However, the specific terms of the forfeiture of earnest money can vary and are subject to the contractual agreement between the buyer and seller. It is important for both parties to clearly understand and agree upon the conditions under which earnest money will be forfeited or refunded. In Connecticut, as in other states, real estate transactions and the handling of earnest money deposits are also governed by state statutes and regulations that outline proper procedures and protections for both buyers and sellers.