What term is used for the money required from a buyer to hold a property while the sale is being arranged?

The term "Earnest Money" refers to the deposit made by a buyer to demonstrate their serious intent to purchase a property. This money is held in trust or escrow and signifies the buyer's commitment while arrangements for the sale are being finalized. The earnest money serves as a way to reassure the seller that the buyer is genuine and provides some financial backing to the offer.

If the transaction proceeds successfully to closing, the earnest money is typically applied to the down payment or closing costs. If the deal falls through due to contingencies agreed upon in the contract, the buyer may be entitled to a refund of their earnest money. In contrast, if the buyer decides not to proceed without a valid reason, they may forfeit the earnest money to the seller as a penalty for backing out of the agreement. This practice helps to ensure both parties are acting in good faith during the property sale process.