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 Oregon, 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 typically held in an escrow account until the transaction is completed or terminated. If the buyer fails to fulfill their contractual obligations and the transaction does not close, the earnest money is often forfeited to the seller, as per the terms outlined in the purchase agreement. While earnest money is not a legal requirement for a real estate contract to be valid in Oregon, it serves as financial reassurance for the seller, who may be foregoing other potential sales while the property is off the market. The specific rules and regulations regarding earnest money, including the amount, conditions for forfeiture, and escrow handling, are typically detailed in the real estate purchase agreement and governed by state statutes and common law.