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 South Carolina, 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 negotiation process. South Carolina law does not mandate the payment of earnest money for a real estate contract to be valid; however, it is a common practice to provide assurance to the seller. If the buyer defaults on the agreement and fails to complete the purchase, the earnest money is usually forfeited according to the terms set forth in the purchase agreement, compensating the seller for the time the property was off the market. The specific conditions under which earnest money may be forfeited or returned are typically outlined in the purchase contract, and it is crucial for both parties to clearly understand these terms. It is advisable for buyers and sellers to consult with an attorney to ensure that the contract terms regarding earnest money are fair and legally enforceable under South Carolina law.