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 New Hampshire, 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 a legal requirement for a valid real estate purchase contract in New Hampshire, it is a common practice to provide sellers with assurance that the buyer is committed to the transaction. If the buyer defaults on the agreement and fails to close the sale without a legally valid reason, the earnest money is usually forfeited to the seller, according to the terms set forth in the purchase agreement. This forfeiture compensates the seller for the time the property was off the market and for any other potential sales opportunities that may have been missed. The terms and conditions regarding earnest money, including the amount, the conditions under which it may be forfeited or returned, and how it will be handled, should be clearly outlined in the purchase and sale agreement.