Earnest Money

Good faith sum of money given to bind a contract, for example an agreement to purchase real property, or a commitment fee to assure an advance of funds by a lender. In a real estate transaction, the money is applied to the purchase price and is forfeited if the purchaser fails to carry out the terms of the agreement.

A Deposit made by a purchaser of real estate to evidence Good Faith.
Example: It is customary for the buyer to give the seller earnest money at the time a Sales Contract is signed. The earnest money generally is credited to the Down Payment at Closing. Until closing a Broker must hold earnest money in a separate account. See also Commingle.