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 North Carolina, earnest money is a deposit made by a buyer to demonstrate their good-faith intention to purchase real estate. This deposit is typically held in an escrow account during the period the property is under contract. If the buyer defaults and does not complete the purchase, the earnest money is usually forfeited to the seller, as per the terms outlined in the purchase agreement. While earnest money is not a legal requirement for a real estate contract to be valid in North Carolina, it is a common practice used to show the buyer's commitment and to compensate the seller for taking the property off the market during the transaction process. The specific terms regarding earnest money, including the amount, conditions for forfeiture, and handling of the funds, should be clearly stated in the purchase contract. It is advisable for both buyers and sellers to review these terms carefully, possibly with the assistance of an attorney, to ensure they understand their rights and obligations regarding the earnest money deposit.