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 Ohio, earnest money is a deposit made by a prospective buyer to demonstrate their serious intent to purchase real estate. It is typically held in an escrow account during the negotiation process. 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 complete the purchase without a legally justifiable reason, the earnest money is usually forfeited to the seller, as per the terms outlined in the purchase agreement. The exact conditions under which earnest money may be forfeited or returned are typically specified in the real estate contract, and Ohio state statutes and case law would govern the interpretation and enforcement of these provisions. 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.