Buying in Garland and wondering how earnest money really works in Texas? You are not alone. This small line in your offer can feel big when you are wiring funds and watching deadlines. In this guide, you will learn what earnest money is, how it pairs with the Texas option period, what amounts are common around DFW, and how to protect your deposit. Let’s dive in.
What is earnest money in Texas?
Earnest money is a good‑faith deposit that shows a seller you are serious. In Texas, it is part of your funds for the purchase and is applied to your price or closing costs at closing unless you agree to something different in your contract. You and the seller choose the amount and name the escrow agent who will hold it, usually a title company. The timeline for delivering the deposit is set in the contract you sign.
The Texas One to Four Family Residential Contract is widely used for resale homes. It includes fill‑in fields for who holds the deposit and when you must deliver it. In practice, buyers often deposit earnest money within a short window after the effective date, commonly within 1 to 3 business days, though you can negotiate a different timeline.
Earnest money vs. the option fee
These two payments serve different purposes.
- Earnest money is held by the escrow agent and can be refundable or kept by the seller depending on contract rights and actions.
- The option fee is paid to the seller for the buyer’s unrestricted right to terminate during the option period. If you terminate during the option period, the option fee usually stays with the seller.
If you cancel within the option period according to the contract’s notice rules, your earnest money is normally refunded because you used a contract right to terminate.
Typical amounts in Garland and DFW
Local practice varies by price and how competitive the market is, but these ranges are common in the Garland area:
- Lower‑priced homes: flat deposits around $1,000 to $3,000.
- Mid‑price homes: about 1 percent of the purchase price is a common guideline.
- Higher price or hot markets: 1 to 2 percent, sometimes more to stand out against multiple offers.
Option fee amounts in Texas often range from $100 to $500. In many DFW neighborhoods, $100 to $250 is frequent for typical single‑family homes. In more competitive scenarios, buyers may increase the option fee or shorten the option period.
Local examples
- Example A: $250,000 list price. Earnest money $2,500, option fee $200, option period 7 days.
- Example B: $400,000 list price in a competitive area. Earnest money $4,000, option fee $300, option period 3 to 5 days.
- Example C: $600,000 list price, very competitive. Earnest money $9,000 (about 1.5 percent), option fee $500, or option waived.
Your exact numbers should match your budget, the property, and the seller’s expectations for the neighborhood.
How the timeline works
Every contract is different, but most follow a similar flow in Texas.
From offer to deposit
- Day 0: You have an effective date once all parties sign.
- Deposit deadline: Many buyers deposit earnest money within 1 to 3 business days after the effective date, based on the contract fill‑ins.
- Escrow agent: The contract names a title company or broker trust account to hold funds. Always get a receipt for your deposit.
The option period
- The option period begins on the effective date and lasts the number of days you fill in. Common ranges are 3 to 10 days.
- You pay the option fee to the seller in exchange for the right to cancel for any reason during that period.
- If you plan to inspect, schedule inspections right away. Option days move quickly.
Closing and credit
- If the sale closes, the escrow agent credits your earnest money on your closing statement.
- Your lender may ask for proof of the earnest money deposit for your loan file. Keep your receipt.
When you can get your earnest money refunded
If you terminate during the option period
If you send written notice to terminate before the option period expires and follow the contract’s delivery rules, your earnest money is typically refunded. The option fee usually stays with the seller.
If another contingency applies
Many contracts include other termination rights. Financing approval, appraisal, or title issues can allow a refund if you terminate on time and as the contract requires. The key is to meet the notice rules and deadlines in the agreement.
If the buyer defaults
If you fail to close without a contract right to terminate, the seller may have remedies. Contracts can allow the seller to keep the earnest money as damages if the buyer defaults. In some cases, the seller can pursue specific performance or other damages. The remedy depends on the exact contract language and facts.
How escrow agents handle funds
The escrow agent follows the written instructions in the contract. They will usually disburse funds at closing, upon a written mutual release by both parties, or after a final court order. If there is a dispute, the escrow agent will hold the funds until the parties resolve it or until a court or dispute process directs release. You should keep all notices and written confirmations related to termination, delivery, and deadlines.
Refunds after a timely termination are often processed within days to a few weeks. Processing times vary by title company. Ask your escrow officer for a current estimate.
Budgeting for earnest money in Garland
Set a plan for your deposit before you write an offer. Here is a simple framework.
- Earnest money: Plan for about 1 percent of your target price, adjusted for the property and market.
- Option fee: Plan for $100 to $500, based on local norms and how competitive the area is.
- Inspections: Budget $300 to $600 or more depending on property size and extra tests you choose.
- Closing costs and reserves: Coordinate with your lender on cash to close and any appraisal gap funds.
Example for a $350,000 target home:
- Earnest money: $3,500
- Option fee: $200
- Inspection: $300 to $600
A practical checklist for Garland buyers
Before you make an offer
- Decide how much earnest money you are comfortable depositing.
- Choose your option period length and fee based on your needs and market speed.
- Confirm which title company will hold escrow and their deposit methods.
At contract signing
- Pay the option fee to the seller as the contract states.
- Deliver earnest money to the escrow agent by the deadline and get a receipt.
- Save your contract and receipt for your lender and your records.
During the option period
- Schedule inspections right away and review results quickly.
- If you plan to terminate, send written notice before the option period ends.
If you proceed to closing
- Share deposit documentation with your lender if requested.
- Track appraisal and financing deadlines and respond to lender requests.
If a dispute comes up
- Save all written notices and confirmations of delivery.
- Work with your agent and escrow officer on next steps. If funds are at risk, consider legal counsel.
Backup offers and earnest money in Garland
If you submit a backup offer, the schedule for when you deposit earnest money can change. In many cases, your earnest money is due when the backup becomes the primary contract, or as the contract specifies. Ask your agent to walk you through the timing so you are ready when the status changes.
Tips to strengthen your offer without overexposing risk
- Use an earnest money amount that aligns with local norms for the price point, then focus on clean terms and clear timelines.
- Consider a shorter option period if you can inspect quickly. Coordinate inspector availability before you offer.
- Communicate your financing strength with a solid preapproval and fast lender milestones.
- If a seller asks for a higher deposit than you are comfortable with, you can negotiate. You might offer a faster close or stronger documentation instead of a larger deposit.
Put local norms to work for you
Garland neighborhoods can move at different speeds. A home near major employers or key commuter routes may draw multiple offers, while others may allow more time for due diligence. Your earnest money and option strategy should match the price band, condition of the home, and the seller’s expectations.
If you want a calm, step‑by‑step plan from the first showing to closing day, our team is here to help. We can guide you on typical deposit amounts, timelines that fit your schedule, and ways to keep your offer strong while protecting your budget. When you are ready to take the next step, reach out to The Dunnican Team at Coldwell Banker Apex, Realtors.
FAQs
What is earnest money in a Texas home purchase?
- It is a good‑faith deposit that shows you are serious and is applied to your price or closing costs at closing unless you agree otherwise in your contract.
How does the Texas option fee differ from earnest money?
- The option fee is paid to the seller for the right to terminate during the option period and usually is not refunded. Earnest money is held in escrow and may be refunded if you terminate under a contract right.
What earnest money amounts are typical in Garland and DFW?
- Many buyers use about 1 percent of the purchase price. Flat deposits of $1,000 to $3,000 are common at lower prices, and 1 to 2 percent is more common in competitive markets.
When do I deposit earnest money in Texas?
- Your contract sets the deadline. In practice, many buyers deposit within 1 to 3 business days after the effective date with the named escrow agent.
Can I get my earnest money back if I cancel during inspections?
- Yes, if you send written notice before the option period expires and follow the contract’s delivery rules. The option fee usually stays with the seller.
What happens to earnest money if financing or appraisal falls through?
- If your contract includes those contingencies and you terminate on time under those terms, you are typically entitled to a refund of the earnest money.
What if the buyer defaults without a contract right to terminate?
- The seller may be able to keep the earnest money as damages, and in some cases may seek other remedies. The outcome depends on the contract language and facts.
