How Much Is Earnest Money in Texas? A Guide to Texas Earnest Money

Key takeaways: 

• Earnest money in Texas typically ranges from 1% to 3% of the purchase price, depending on market conditions and negotiation terms.
• The deposit must be delivered to the escrow agent or title company within the time frame outlined in the contract; failure to do so may allow the seller to terminate the agreement.
• Earnest money is usually refundable if a contingency — such as financing, inspection, or appraisal — isn’t met. Once contingencies are cleared, the deposit often becomes non-refundable.
• The earnest money deposit is applied toward your down payment or closing costs at closing.
• To protect your deposit, always work with a licensed agent, confirm the escrow details, and keep written documentation for all contract updates.

If you’re buying a home in Texas, you’ve probably heard the term earnest money, the deposit that shows a seller you’re serious about your offer. In most cases, earnest money in Texas ranges from 1% to 3% of the home’s purchase price, but the exact amount can vary depending on market conditions and your agreement with the seller. According to the Texas Real Estate Commission (TREC), buyers must deliver their earnest money to an escrow agent within the time frame listed in the contract; if the money isn’t delivered on time, the seller can terminate the deal or pursue remedies outlined in Paragraph 15 of the TREC contract.

In real estate, a contract is only binding if there’s “consideration,” meaning both sides are offering something of value. In this case, the buyer’s promise to buy and the seller’s promise to sell fulfill that requirement. Because earnest money plays such a key role in this exchange, understanding how much to put down and when to deliver it can help you avoid delays or even losing out on your dream home.

What is earnest money?

Earnest money is a good-faith deposit that buyers include with their offer to show they’re serious about purchasing a home. It acts as a sign of commitment and gives the seller confidence that the buyer won’t back out without reason. 

Once the offer is accepted, the earnest money is typically held in an escrow account managed by a title company or brokerage until closing. If the sale is completed, the deposit is applied toward the buyer’s down payment or closing costs. If the deal falls through for a reason covered by the contract, such as a failed inspection or financing contingency, the buyer may get their deposit back.

Earnest money vs. option money in Texas

Earnest money and option money serve different purposes in a Texas real estate contract. Earnest money is a good-faith deposit that shows you’re committed to the purchase, and it typically ranges from 1 to 3 percent of the home’s price. 

Option money, on the other hand, is usually a smaller, flat fee that gives you the right to cancel the contract during the option period. Option fees are most common in land or commercial transactions, although they can also appear in residential contracts depending on local practices. You are not required to provide both; it depends on the type of property you’re buying and what’s negotiated in your contract. For more about this topic, read here.

How much do you give for earnest money?

Most buyers in Texas put down between 1% and 3% of the home’s purchase price as earnest money. For example, if you’re buying a $500,000 home, your deposit might range from $5,000 to $15,000. In a competitive market, you may choose to offer a higher amount to strengthen your offer; in a slower market, a smaller deposit may still be acceptable. The right amount depends on local norms, the property’s demand, and what feels comfortable for your budget.

How much is earnest money in Texas? Example amounts by home price

Home Price	1% Earnest Money	2% Earnest Money	3% Earnest Money	5% Earnest Money (hot markets)
$250,000	$2,500	$5,000	$7,500	$12,500
$300,000	$3,000	$6,000	$9,000	$15,000
$500,000	$5,000	$10,000	$15,000	$25,000

When is earnest money due in Texas?

In Texas, earnest money is typically due within three business days after the contract is signed; however, the exact deadline depends on the terms outlined in your purchase agreement. According to the Texas Real Estate Commission (TREC), the buyer must deliver the earnest money to the escrow agent or title company listed in the contract. If the deposit isn’t delivered on time, the seller has the right to terminate the agreement or pursue other remedies. Buyers usually submit earnest money via wire transfer, check, or money order to the title company.

For example, if your offer is accepted on a Friday, you’ll generally need to deliver your earnest money by the following Wednesday to stay compliant with the contract terms.

How to pay earnest money

According to Redfin, buyers can submit earnest money using several secure methods, such as a wire transfer, certified check, cashier’s check, or an electronic payment system provided by the title or escrow company. 

Once your offer is accepted, your contract will outline exactly where the funds should be delivered and the deadline for payment, which is usually within a few days. To avoid delays or errors, follow the instructions from your agent and the title company carefully, confirm all account details before sending money, and keep a receipt or confirmation for your records. Submitting earnest money the right way keeps your transaction on track and protects you from common payment issues.

Where is the money held, and how is it applied?

Earnest money is typically held in an escrow account managed by a title company or another neutral third party. This ensures the funds stay protected while inspections, negotiations, and financing steps are completed. 

At closing, the earnest money is credited toward your down payment or closing costs, reducing the amount you need to bring to the table. If the contract is canceled for a valid reason, the escrow company releases the funds according to the terms in your agreement, which helps protect both the buyer and seller throughout the transaction.

Refunds, forfeitures, and common scenarios

Yes, earnest money can be refundable in certain situations, depending on the terms outlined in your purchase contract. In Texas, most real estate contracts include specific contingencies, conditions that must be met for the sale to move forward. If one of these contingencies isn’t satisfied, the buyer may be entitled to a refund of their earnest money.

Common refundable situations include:

• Financing contingency: If you’re unable to secure mortgage approval within the agreed timeframe, you can typically cancel the contract and have your earnest money returned.
• Inspection contingency: If a home inspection reveals significant issues and you decide to withdraw your offer within the allowed period, your deposit is usually refundable.
• Appraisal contingency: If the home appraises for less than the purchase price and you can’t reach a new agreement with the seller, you may cancel and recover your deposit.
• Title or seller default: If title issues arise or the seller fails to meet their obligations, buyers can often terminate the contract and get their earnest money back.

It’s important to read your contract carefully and work closely with your real estate agent or attorney to understand your rights. Once all contingencies are met and the sale moves forward, the earnest money becomes nonrefundable and is applied toward your closing costs or down payment.

Texas earnest money rules and release process

In Texas, earnest money stays in an escrow account with the title company until the transaction closes or terminates, and the release process becomes especially important when a deal falls through. If the buyer cancels within a protected period, such as the option period or under a valid contingency, they are typically entitled to a refund. In these cases, both the buyer and seller must sign a release of earnest money form so the title company can return the funds. If the cancellation happens outside the contract protections, the seller may be entitled to keep the earnest money as compensation for taking the home off the market. When the parties cannot agree on who should receive the funds, the title company cannot release the money and may place it in interpleader, allowing the courts to decide the outcome. Understanding this process helps buyers avoid delays and ensures there are no surprises if a contract falls apart.

When is earnest money nonrefundable?

Earnest money becomes nonrefundable once all contract contingencies have been met and both parties are moving forward toward closing. At this point, the deposit shows your commitment to the purchase; backing out without a valid reason could cause you to lose that money.

In Texas, your earnest money may become nonrefundable in the following situations:

• You miss a deadline. If you fail to meet important timelines, such as inspection or financing deadlines, your right to a refund may expire.
• You change your mind after contingencies are cleared. Once inspections, appraisals, and financing are approved, withdrawing your offer can forfeit your deposit.
• You default on the contract. If you breach the terms of the agreement, for example, by failing to close on time without cause, the seller may keep the earnest money as compensation.
• You waive contingencies. If you remove standard protections like inspection or financing contingencies to strengthen your offer, you also give up the right to recover your deposit if the deal falls through.

At this stage of the transaction, earnest money becomes part of your financial commitment to the home purchase. Before signing, make sure you understand every clause in your contract and consult your real estate agent or attorney if anything is unclear.

How to protect your earnest money in Texas

Because earnest money represents a significant financial commitment, it’s important to take steps to safeguard it throughout the homebuying process. In Texas, buyers can protect their deposit by following these best practices:

• Work with a licensed real estate agent. An experienced agent can ensure all contract terms, deadlines, and contingencies are clearly outlined and followed.
• Verify the escrow agent or title company. Only deliver earnest money to a reputable and licensed escrow holder listed in the contract; never send funds directly to a seller or agent.
• Pay by a traceable method. Use a wire transfer, certified check, or money order so there’s a clear record of payment and receipt.
• Understand your contingencies. Review each contingency clause carefully, and make sure you know how and when to exercise your right to cancel if something goes wrong.
• Get everything in writing. Always confirm changes, extensions, or releases of earnest money in writing and signed by both parties.

By following these precautions, you’ll reduce the risk of disputes and protect your investment from potential loss. A clear understanding of the Texas Real Estate Commission (TREC) rules and your contract terms helps ensure your earnest money remains secure until closing.

Is earnest money required by law?

Earnest money is not required by law, but it is a standard part of most real estate contracts because it shows the buyer is serious about moving forward. While you’re not legally obligated to provide it, sellers often expect an earnest money deposit as part of a competitive offer. Without it, your offer may appear weaker or less committed compared to others. 

The amount is negotiable, and the terms for refund or forfeiture are outlined in the contract, but the decision to include earnest money is ultimately part of the buyer and seller’s agreement rather than a legal requirement.

FAQs about earnest money in Texas

Who holds the earnest money in Texas?

Earnest money in Texas is typically held by a title company or escrow agent named in the purchase contract. They keep the funds in a secure escrow account until closing or until the contract is terminated according to its terms.

Can you lose your earnest money?

Yes, you can lose your earnest money if you default on the contract, miss key deadlines, or back out of the purchase after all contingencies have been cleared. Once those protections expire, the seller may keep the deposit as compensation for taking the home off the market.

Does earnest money come off the purchase price?

Yes, in most cases, earnest money is applied toward the home’s purchase price at closing. The deposit typically goes toward your down payment or closing costs, reducing the total amount you’ll need to bring to the closing table. Think of it as an early payment that shows the seller you’re serious about buying.

The money remains in an escrow account until the sale is finalized; once the deal closes, it’s credited back to you as part of your total home purchase. However, if the transaction falls through for a reason not covered by your contract, the seller may be entitled to keep the earnest money as compensation for lost time or opportunity.

How much earnest money is normal in Texas? 

In Texas, most buyers put down between 1 percent and 3 percent of the home’s purchase price as earnest money. The exact amount depends on the local market, how competitive the offer needs to be, and what both parties negotiate in the contract.

What is a typical earnest money amount? 

A typical earnest money amount is usually 1 percent to 3 percent of the purchase price, although it can be higher in hot markets where buyers want to stand out. This deposit shows the seller you’re committed to the transaction and helps strengthen your offer.

What is the earnest money rule in Texas? 

The main earnest money rule in Texas is that the deposit must be delivered to the title company within the deadline listed in the contract, usually within three business days of the offer being accepted. The money is held in escrow, applied to closing costs at settlement, and refunded or forfeited based on the cancellation terms in the contract.

How much is earnest money on a $500,000 house?

On a $500,000 home, earnest money typically ranges from $5,000 to $15,000, based on the standard 1 percent to 3 percent guideline. In competitive areas or multiple-offer situations, buyers may offer more to make their offer stronger.

What to remember about earnest money deposits

Earnest money plays a key role in every Texas home purchase; it shows your commitment and helps the seller feel confident moving forward. While it’s usually refundable under specific conditions, understanding when it becomes nonrefundable and how to protect it is crucial. By working with a licensed real estate agent, reviewing your TREC contract carefully, and meeting all deadlines, you can make sure your deposit stays secure and goes toward your dream home when it’s time to close.