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 Missouri, earnest money is a common practice in real estate transactions, serving as a deposit to demonstrate the buyer's good-faith intention to purchase the property. While not legally required for a contract to be valid, it is frequently used to show commitment and to provide the seller with some security. If the buyer defaults and does not complete the purchase, the earnest money is typically forfeited according to the terms set forth in the purchase agreement, unless the contract stipulates otherwise or certain contingencies are met that allow for the return of the deposit. The earnest money is often held in an escrow account until the transaction is completed or terminated. The specific regulations and handling of earnest money can be subject to state statutes and the terms of the real estate contract. It is advisable for parties involved in such transactions to clearly understand their rights and obligations as outlined in their contract and to consult with an attorney for guidance specific to their situation.