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Earnest money

Earnest money is the initial cash deposit that makes a sales contract legally enforceable. Contracts require the transfer of consideration, i.e., something of value to be enforceable.

Expanded Definition

In the case of a purchase of something like a vehicle, the earnest money can also be the downpayment. In the case of real estate transactions, the earnest money is submitted with the sales contract, but a larger downpayment comes later. Practices vary regionally and by the details of the transaction and preferences of the buyer and seller.

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