What Is Earnest Money and When Is It Due in Texas?

Earnest money is a deposit showing the buyer is serious, held by the escrow agent and credited toward the buyer's costs at closing. In Texas it is due to the escrow agent within three days after the effective date, counting the effective date as day zero.

How much is typical?

Commonly around one percent of the purchase price, though it is negotiable and varies by market and price point.

In competitive situations buyers sometimes offer considerably more to strengthen an offer, since a larger deposit signals both seriousness and financial capacity. There is no required amount, and the figure is agreed in the contract like everything else.

When exactly is it due?

Within three days after the effective date, and the counting method matters.

The effective date is day zero. Each following day is one, two, three. So an effective date of 1 November means delivery by midnight on 4 November. If that third day falls on a Saturday, Sunday or legal holiday, the contract provides an automatic extension to the next day that is not one of those.

The TREC forms include a formal definition of legal holiday, added in the July 2026 updates, so check it rather than assuming which days count.

Who holds it?

The escrow agent, which in Texas is normally the title company. Never the seller and never the agent.

It sits in escrow for the duration of the transaction and is applied to the buyer's costs at closing. That is why it is not really a cost at all in a deal that closes: it is money paid early rather than money paid extra.

How is it different from the option fee?

They are separate payments with separate purposes, and they are routinely confused.

One further distinction catches experienced agents: an additional fee to extend an option period goes directly to the seller, not to escrow.

Do you get it back?

It depends entirely on how the contract ends.

Terminating within the option period generally returns it, since the buyer exercised a right they paid for. Terminating under a contingency such as financing or appraisal generally returns it, if done within the relevant deadline. Walking away with no contractual basis generally puts it at risk, and the seller may pursue it.

The specifics are a legal question rather than one an agent should answer. Explain what the contract says and refer the rest.

How does it actually get released?

By agreement, and this is the step agents forget.

Termination and release are separate actions. A buyer who terminates properly and does nothing else leaves their money sitting in escrow while everyone waits for a signature nobody chased. The release generally requires both parties to sign.

If the parties disagree about who is entitled to it, the escrow agent will not simply choose. It stays where it is until the dispute is resolved, which is slow and unpleasant for everybody.

What is the most common mistake?

Nobody confirming receipt.

Money sent is not money received. The buyer says they sent it, the agent assumes it arrived, and the deadline passes. Get written confirmation from the title company that both the earnest money and the option fee were received, and get it before the deadline rather than after.

I sent it is not a defense once the window has closed, and this is the single most common early failure in a Texas file.

How should the buyer actually send it?

By whatever method the title company specifies, and with the same wire fraud caution that applies at closing.

Criminals target real estate transactions at both ends, and a fraudulent request for earnest money early in a file is less publicized than the closing-day version but does happen. The rule is identical: confirm any wiring details verbally on a number you already had, never one taken from an email.

Tell the buyer this at contract rather than assuming they know. Most people have never been warned about it by anyone.

Can it be paid late?

Not safely, and the consequences depend on the contract.

Late delivery can put the buyer in default and, in the case of the option fee, can mean the termination right was never properly established. If a delivery is going to be late, raise it immediately with the other agent and your broker rather than hoping it passes unnoticed.

A deadline tracker to fill in on day zero, including both delivery windows and a confirmation column, plus the full six-phase Texas sequence from executed contract to funding.

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