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 North Dakota, earnest money is a deposit made by a prospective buyer to demonstrate their serious intent to complete a real estate transaction. It is typically held in an escrow account during the period between the acceptance of the offer and the closing of the sale. 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 close the sale without a legally justifiable reason, the earnest money is usually forfeited to the seller, as per the terms outlined in the purchase agreement. The specific rules and regulations regarding the forfeiture of earnest money can vary depending on the contract and state laws. In North Dakota, real estate transactions and the handling of earnest money deposits are governed by state statutes and common law principles that dictate the rights and obligations of both parties in a real estate sale.