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 Hawaii, earnest money is a deposit made by a prospective buyer into an escrow account to demonstrate their good-faith intention to complete a real estate transaction. While earnest money is not a legal requirement for a valid real estate purchase contract in Hawaii, it is a common practice to provide sellers with assurance that the buyer is serious about the purchase. If the buyer defaults and does not finalize the transaction, the earnest money is typically forfeited according to the terms of the purchase agreement, and it is given to the seller as compensation for the time the property was off the market and other potential opportunities that may have been missed. The specific terms regarding the forfeiture or return of earnest money are usually outlined in the real estate purchase agreement, and it is important for both buyers and sellers to clearly understand these terms before entering into a contract. In Hawaii, real estate transactions and escrow processes are regulated by state statutes, and it is advisable for parties involved in such transactions to consult with an attorney to ensure that their rights and interests are adequately protected.