What are funds paid to confirm or commit to a contract called?

The funds paid to confirm or commit to a contract are called earnest money. This financial commitment demonstrates a buyer's serious intent to purchase a property and indicates to the seller that the buyer is committed to following through with the transaction. Typically, earnest money is a percentage of the purchase price and is held in an escrow account until the closing of the sale. If the transaction proceeds without issues, this money is then applied to the down payment or closing costs. However, if the buyer backs out of the deal without a valid reason specified in the contract, the seller may be entitled to keep the earnest money as compensation for the time and opportunity lost.

While option money might be related in real estate contexts, it generally refers to payments that give the buyer the right to purchase the property at a later date, not necessarily confirming an immediate commitment. A security deposit is usually associated with rental agreements rather than purchasing properties, and contractual funds is a more generic term that does not specifically apply to earnest money.