Texas earnest money is a buyer's good-faith deposit on a residential real estate contract, typically 1-2% of the purchase price, held in the title company's escrow account and delivered within 3 calendar days of the contract's effective date. Texas is one of the few states where earnest money runs alongside a separate option fee, a non-refundable payment that goes directly to the seller (not to escrow) and buys the buyer an unrestricted termination right during the option period. Understanding the distinction between these two payments, and the deadlines attached to each, is critical for agents and TCs managing TREC files. This guide covers Texas earnest money delivery rules, the option fee mechanics that make Texas unique, refund paths, cure-and-forfeit procedures, and the routing mistakes that cause the most problems.
Key takeaways
- Texas earnest money is due within 3 calendar days of the contract's effective date. Weekends count.
- The option fee ($100-$500, non-refundable) goes directly to the seller. Earnest money (1-2%) goes to the title company's escrow account.
- If the buyer terminates during the option period, earnest money is returned but the option fee is not.
- Cure-and-forfeit applies if earnest money delivery is late: seller notifies buyer, buyer has a cure window, then seller can cancel.
- Routing errors (sending earnest money to the brokerage instead of the title company) are the most common cause of deadline failures.
How does Texas earnest money work?
Earnest money on a Texas residential transaction is governed by the TREC One to Four Family Residential Contract (Form 20-18), the mandatory statewide form for residential deals. The Texas Real Estate Commission (TREC) is unique among state regulators in mandating a single standard contract form for residential transactions. Unlike many states where associations publish optional forms, every Texas residential deal uses the TREC form.
The earnest money deposit signals buyer commitment and provides the seller a degree of financial protection against a buyer who walks without cause. Typical deposits run 1-2% of the purchase price, lower than the national 1-3% range, partly because Texas's option fee system gives sellers a separate early-stage protection layer.
The Texas Association of Realtors publishes member education on the TREC form and its earnest money provisions. The National Association of Realtors' 2025 Member Profile shows a growing share of agents working across state lines, which means earnest money assumptions from other markets don't always transfer to Texas. A 4-day deadline in Utah and a 3-day deadline in Texas both feel short, but the mechanics differ.
When does earnest money have to be delivered in Texas?
Three calendar days from the effective date of the contract. Calendar days means weekends and holidays count. A contract that becomes effective on Friday has its earnest money due by Monday.
The 3-day window is one of the tightest TREC deadlines. Missing it triggers the cure-and-forfeit process under the contract: the seller delivers written notice of the default, the buyer receives a short cure window to deliver the earnest money, and if the cure window closes without receipt, the seller can cancel the contract. The title company must also cash the buyer's check within 3 days of receipt, a Texas-specific requirement that prevents deposits from sitting unprocessed.
In our TC work on Texas files, late earnest money almost never happens because the buyer intentionally delays. It happens because the check goes to the wrong place.
What is the difference between an option fee and earnest money?
This is the question that trips up agents new to Texas. Both are buyer payments. Both happen early in the contract. But they serve different purposes, go to different parties, and have different refund rules.
| Feature | Option fee | Earnest money |
|---|---|---|
| Typical amount | $100-$500 | 1-2% of purchase price |
| Paid to | Seller (directly) | Title company escrow |
| Refundable? | No (non-refundable) | Yes, if buyer cancels within contingency windows |
| Purpose | Buys unrestricted termination right during option period | Good-faith deposit; credited toward purchase at closing |
| Delivery deadline | Per contract (typically at or before option period starts) | 3 calendar days from effective date |
| What it buys | Right to walk for any reason during option period (7-10 days) | Nothing by itself; it's a commitment deposit |
The option fee is Texas-specific. Most states use contingency-based inspection periods instead. In Texas, the option period (typically 7-10 days) gives the buyer an unrestricted right to terminate for any reason, no explanation needed, in exchange for the non-refundable option fee. If the buyer walks during the option period, they lose the option fee but get the earnest money back.
On Texas files we see, the single most common confusion is agents (often relocating from other states) treating the option fee like a second earnest money deposit. It's not. The option fee goes to the seller, not to escrow. Routing the option fee to the title company instead of the seller delays the seller's receipt and creates a contract compliance issue.
Where does Texas earnest money get held?
The title company's escrow account holds earnest money on the vast majority of Texas residential transactions. Texas is a title-company state (Category D under the closing conventions taxonomy). No attorney is required at closing. The title company handles escrow, title search, document preparation, the closing table, and recording.
The TREC contract specifies the escrow agent at offer time. In nearly all cases, that's the title company handling closing. Broker trust accounts are a legal alternative but uncommon and discouraged. Independent escrow companies occasionally appear on investor deals.
Texas's title insurance rates are regulated by the Texas Department of Insurance (TDI), which means rates are standardized statewide. The title company's role as escrow holder is embedded in the standard transaction flow.
Three routing rules that prevent delivery failures:
- Read the TREC contract's escrow agent section on the day of acceptance. Confirm the title company is named.
- Send the buyer written routing instructions within 24 hours of the effective date: title company name, address, wire instructions, and escrow officer contact.
- Confirm receipt directly with the title company's escrow officer by day 2. Don't wait until day 3.
What earnest money refund protections does a Texas buyer have?
Texas buyers have several refund paths depending on when and why they cancel.
Option period termination. If the buyer terminates during the option period (typically 7-10 days) for any reason, the earnest money is returned in full. The buyer loses the option fee but keeps the deposit. This is the broadest buyer protection in the TREC contract.
Financing contingency denial. If the buyer's loan application is denied, the buyer can notify the seller and recover the earnest money. The standard financing contingency window is 21 calendar days under the TREC form.
Appraisal shortfall. If the property appraises below the purchase price and the buyer elects not to cover the difference, the buyer can exercise the appraisal contingency and recover earnest money.
Seller breach. If the seller fails to deliver required disclosures (including the new mold remediation disclosure under the January 2025 TREC form update), fails to clear title, or otherwise breaches the contract, the buyer's earnest money is returned.
| Cancellation scenario | Earnest money returned? | Option fee returned? | Deadline |
|---|---|---|---|
| Buyer cancels during option period | Yes | No | Option period (7-10 days) |
| Buyer's loan denied | Yes | N/A (already past option) | Financing contingency (21 days) |
| Appraisal below purchase price | Yes | N/A | Appraisal contingency |
| Seller breaches contract | Yes | Depends on timing | Any time |
| Buyer cancels after all deadlines (no cause) | No, seller keeps it | N/A | After all contingencies expire |
| Buyer fails to deliver on time | Cure-and-forfeit process | N/A | 3 calendar days from effective date |
For the full TREC contract timeline and how these deadlines interact, see TREC forms and the Texas TC's role.
What happens if Texas earnest money is late or forfeited?
If the buyer cancels after all contingency deadlines without a covered cause, the seller is generally entitled to keep the earnest money. "Without a covered cause" means the cancellation falls outside the option period, financing denial, appraisal shortfall, or seller-breach pathways.
The title company (as escrow holder) won't release earnest money unilaterally. Either both parties sign a release authorizing disbursement, or the dispute escalates. Texas does not have a statutory earnest money mediation requirement, but most disputes settle through negotiation between the brokers and title company. Attorney involvement isn't the default path on Texas earnest money disputes, which differs from attorney-state conventions.
On the Texas files we've worked where earnest money ended up contested, the dispute almost always involved a buyer who intended to close, hit a financing or appraisal issue after the contingency deadline passed, and then argued the circumstances were beyond their control. These rarely go to litigation. Most settle with a partial return.
How does the January 2025 TREC form update affect earnest money?
The January 2025 TREC form changes didn't alter the earnest money delivery deadline or escrow mechanics, but two changes affect the broader transaction timeline that earnest money sits inside.
New mold remediation disclosure (Paragraph 6E(11)). Sellers must now disclose if mold remediation occurred within the past 5 years. If this disclosure is missing or delivered late, it can extend the buyer's cancellation rights and affect when earnest money becomes non-refundable.
Broker fee documentation (Paragraph 12A). Post-NAR settlement, the seller can no longer offer buyer broker compensation through the MLS. Broker fees are now documented separately. This doesn't change earnest money directly, but it changes the document stack the TC manages alongside the deposit tracking.
The survey waiver option (T-47.1 Declaration under Paragraph 6C) and geothermal energy lease language (Paragraph 4.C) are also new. None change earnest money rules, but all change what a TC tracks on a TREC file. For the full form update breakdown, see TREC forms and the Texas TC's role.
How do agents and TCs prevent Texas earnest money problems?
Five prevention habits that catch the majority of earnest money issues before they escalate:
- Verify the escrow agent designation at intake. Read the TREC form's escrow agent section on the day of acceptance. Confirm the title company is named and the contact information is correct.
- Send written routing instructions to the buyer within 24 hours. Include the title company name, physical address, wire instructions, and escrow officer's direct contact.
- Track earnest money and option fee separately. Earnest money goes to the title company. The option fee goes to the seller. Routing either to the wrong party creates compliance problems.
- Confirm receipt with the title company by day 2. Don't wait for day 3. Get the escrow officer's email confirmation with the deposit date and amount.
- Flag any routing to the brokerage immediately. If the buyer sends the check to the buyer's brokerage instead of the title company, the forwarding delay can push delivery past the 3-day deadline.
How does Quill handle Texas earnest money tracking?
Quill's Texas coordinators verify earnest money routing at contract intake, issue 48-hour and 24-hour reminders before the 3-day deadline, confirm receipt directly with the title company's escrow officer, and separately track the option fee payment to the seller. If cure-and-forfeit becomes necessary, Quill manages the notice process and cure window tracking. The option period deadline, financing contingency, and appraisal contingency are all tracked on the file calendar alongside the earnest money delivery date.
Quill is a transaction coordination firm, not a brokerage. We coordinate files for Texas agents working under their own brokerage's supervision. We don't negotiate terms, provide contract opinions, or practice law. For the full scope of what Quill handles on Texas files, see the Texas transaction coordination hub. For a comparison of how earnest money works differently in an escrow state, see earnest money in Utah.
How Texas earnest money compares to other states
Texas's 3-day delivery deadline is among the shortest in the country, and the option fee system is nearly unique. Utah requires 4 calendar days. California's CAR RPA allows 3 business days (not calendar days). Colorado's CBS contract sets its own delivery window. The day-counting conventions differ enough that agents working multiple states need to verify the specific rules on every file.
The option fee is where Texas stands alone. Most states use contingency-based inspection periods: the buyer has a certain number of days to inspect, and cancellation during that window returns the earnest money. Texas uses the option fee as a separate payment to buy that termination right. This two-payment structure (option fee to seller, earnest money to title company) is the single biggest adjustment for agents relocating to Texas from other markets. For a cross-state earnest money comparison, see earnest money in Utah. For the full Texas contract form breakdown, see TREC forms and the Texas TC's role.
Texas earnest money is simple if you track both payments
The mechanics are straightforward: 3 calendar days, title company escrow, cure-and-forfeit if late. The complexity is the two-payment system. Earnest money and the option fee serve different purposes, go to different parties, and have different refund rules. Track them separately from day one. Confirm routing at intake. Verify receipt directly with the title company and the seller. The rest follows.
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