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 Utah, earnest money is commonly used in real estate transactions as a sign of the buyer's good faith intention to purchase the property. It is not legally required for a contract to be valid, but it is a standard practice to include it to show commitment and to compensate the seller for taking the property off the market during the transaction process. The earnest money is typically held in an escrow account until the closing of the sale. If the buyer defaults on the agreement and fails to complete the purchase without a valid legal reason, the earnest money is usually forfeited to the seller, as per the terms outlined in the purchase contract. The specific conditions under which earnest money may be forfeited or returned are governed by the terms of the real estate contract, and Utah state statutes may provide additional guidance on the handling of earnest money in the event of a dispute. It is advisable for both buyers and sellers to clearly understand the terms of the earnest money deposit as outlined in their contract and to consult with an attorney for legal advice specific to their situation.