Texas is one of the only states where buyers pay both earnest money and option money.
These two deposits play completely different roles, and understanding them early helps avoid confusion later.
When I represent buyers and sellers, I explain exactly how these funds work so you’re protected, competitive, and confident at every step.
Here’s the simple, Texas-specific breakdown.
1. What Is Earnest Money?
Earnest money is a good-faith deposit that shows the buyer is serious about purchasing the property.
✔️ It is held by the title company, not the seller
✔️ It is refundable, depending on contract terms
✔️ It becomes part of your down payment at closing
Think of it as the buyer’s way of showing commitment.
2. How Much Earnest Money Do Buyers Typically Pay in Texas?
The standard in Texas is:
đź’° 1% of the purchase price
Common examples:
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$400,000 home → $4,000 earnest money
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$650,000 home → $6,500 earnest money
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$900,000 home → $9,000 earnest money
In competitive areas like Frisco, Prosper, McKinney, Plano, and Celina, I sometimes recommend increasing earnest money to:
đź’° 2–3%
—to strengthen the offer.
Earnest money is due to the title company within 3 days of the executed contract (calendar days, not business days, unless day 3 is a weekend/holiday).
3. When Do Buyers Get Earnest Money Back?
Earnest money is fully refundable if the buyer terminates for a reason protected in the contract.
Common valid reasons include:
✔️ Termination during the Option Period
✔️ Appraisal issues (if the buyer is protected by the Third-Party Financing Addendum)
✔️ Title problems
✔️ HOA issues
✔️ Survey issues
✔️ Lender denial within contract timelines
If any of these occur, I protect your earnest money every time.
4. When Can Earnest Money Be Lost?
A buyer can lose earnest money if they:
❌ Miss Option Period deadline
❌ Miss financing deadlines
❌ Terminate for a reason not covered by the contract
❌ Fail to deliver earnest money on time
❌ Default on the contract
This is why I track every deadline for my clients so nothing slips through the cracks.
5. What Is Option Money?
Option money is unique to Texas.
It is a non-refundable fee paid directly to the seller in exchange for the buyer receiving an “Option Period”—the right to terminate the contract for ANY reason.
✔️ Paid to the seller
✔️ Non-refundable (but credited back at closing)
✔️ Gives buyer unrestricted right to terminate
This is one of the strongest buyer protections in Texas real estate.
6. How Much Option Money Do Buyers Pay?
Typical ranges:
Normal market:
đź’° $200–$300
Balanced market:
đź’° $300–$500
Competitive market (Frisco, Prosper, McKinney, Celina):
đź’° $500–$2,000+
The more competitive the market, the more important it is to have a strong option fee.
7. How Long Is the Option Period?
Typical Texas Option Period:
5–7 days — competitive markets
7–10 days — normal markets
10–12 days — slow markets
During this time, buyers can:
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Inspect the home
-
Request repairs
-
Review HOA docs
-
Review survey
-
Evaluate MUD/PID notices
-
Run insurance quotes
-
Terminate for ANY reason
This is why it’s important to schedule inspections immediately.
8. Is Option Money Applied Toward Your Closing Costs?
Yes.
✔️ Option money = credited back to you at closing
✔️ Earnest money = credited back to you at closing
If the deal closes, these funds reduce your cash-to-close.
9. When Is Option Money Ever Refunded?
Option money is almost never refunded.
The only exception is:
✔️ If the seller fails to deliver disclosures or required notice documents
(rare, and I monitor each requirement so you’re protected)
Otherwise, option money is non-refundable even if you terminate.
10. How I Guide Clients Through Earnest & Option Money Strategically
When representing you, I help you:
✔️ Decide the right deposit amounts
✔️ Strengthen your offer without unnecessary risk
✔️ Understand what’s refundable and what isn’t
✔️ Protect your earnest money with deadlines
✔️ Use the Option Period to uncover issues
✔️ Negotiate repairs with strategy and data
✔️ Make clean, competitive offers
My job is to protect your money and put you in the strongest position possible.
Bottom Line: Earnest Money & Option Money Are Both Designed to Protect You
They’re two different tools with two different purposes—and when used correctly, they give you incredible protection and leverage in the Texas homebuying process.
Ready to Buy a Home in North Texas?
If you want a Realtor who explains the process clearly, protects your earnest money, and uses the Option Period to your advantage, I’d love to help.
