Earnest Money and Option Fees in Texas, Explained

When your offer on a San Antonio home is accepted, two payments come up almost right away: earnest money and the option fee. Both show the seller you are serious, but they work very differently. Here is what each one does and how it protects you.

What Is Earnest Money?

Earnest money is a good-faith deposit that shows the seller you intend to follow through. In Texas, it is typically delivered to the title company named in the contract, not to the seller directly. The title company holds it in escrow until closing.

At closing, your earnest money is credited toward your down payment or closing costs. It is not an extra cost on top of your purchase.

What Is an Option Fee?

The option fee is unique to Texas contracts. It buys you an option period, a set number of days during which you can terminate the contract for any reason. This is when most buyers schedule inspections, get repair estimates, and take a closer look at the property.

The option fee is usually paid to the seller and is generally non-refundable, though it is often credited back to you at closing if you buy the home.

How They Work Together

During the option period: If you terminate on time, you typically get your earnest money back. You usually give up the option fee.

After the option period: Your earnest money is more at risk. If you back out for a reason not covered in the contract, the seller may have a claim to it.

At closing: Both amounts are usually applied toward your purchase.

How Much Should You Offer?

There is no fixed amount. Both are negotiable and depend on the price of the home, how competitive the market is, and what the seller is looking for. A stronger earnest money deposit or a shorter option period can make your offer more attractive, but it is important to balance that against your own risk.

Tips to Protect Yourself

• Deliver both payments on time. The contract sets firm deadlines.
• Schedule your inspection early in the option period.
• Keep track of every deadline in your contract.
• Ask questions before you sign so you understand what is at stake.

Have Questions About Your Offer?

Every deal is a little different. If you are getting ready to make an offer in San Antonio, reach out and we will walk you through earnest money, option fees, and how to structure a strong offer.