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 Pennsylvania (PA), earnest money is a deposit made by a prospective buyer to demonstrate their serious intent to purchase real estate. This deposit is typically held in an escrow account during the period the property is under contract. If the buyer fails to complete the purchase (fails to close), the earnest money is usually 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 PA, it is a common practice used to provide assurance to the seller, who may be foregoing other potential sales while the property is off the market. The amount and conditions under which earnest money may be forfeited or returned are typically specified in the purchase agreement, and it is advisable for both parties to clearly understand these terms. It's important to note that the specific regulations and practices regarding earnest money can vary, and an attorney can provide guidance tailored to the individual circumstances of a real estate transaction in Pennsylvania.