Earnest Money in Texas: Key Rules on Amounts, Deadlines & Refunds

When buying a house in Texas, your earnest money deposit is a critical part of a successful offer. This good-faith payment, typically 1% to 3% of the purchase price, demonstrates your serious intent to the seller. Based on the standard contract from the Texas Real Estate Commission (TREC), this deposit must be delivered to a title company within a strict deadline—usually three business days after the contract is executed. Crucially, your earnest money is generally refundable if a contract contingency, like financing or inspection, is not met. Once those contingencies are cleared, it becomes non-refundable and is applied to your down payment or closing costs.

What Is Earnest Money in a Texas Real Estate Transaction?

Earnest money is a good-faith deposit made by a homebuyer to show a seller they are serious about their purchase offer. It is not legally required, but it is a standard practice in Texas. When your offer is accepted, the funds are held in an escrow account—a neutral, third-party account managed by a title company—until the transaction closes. If the sale is completed, the deposit is credited toward your closing costs. This deposit protects the seller by providing compensation if the buyer backs out without a contractually valid reason.

How Much Earnest Money Should You Offer in Texas?

The typical earnest money amount in Texas ranges from 1% to 3% of the home's sale price. The exact figure is negotiable and influenced by local market conditions. In a highly competitive seller's market, offering a deposit on the higher end of this range can make your offer more attractive.

When Is the Earnest Money Deposit Due in Texas?

According to the TREC contract, the earnest money must be delivered to the designated title company or escrow agent within the timeframe specified in the contract, which is typically three business days after the contract is fully executed. For example, if your offer is accepted on a Friday, the funds are generally due by the following Wednesday. Failure to meet this deadline can allow the seller to terminate the purchase agreement.

When Is Earnest Money Refundable in Texas?

Your deposit is protected by contingencies, which are conditions that must be met for the sale to proceed. If a contingency is not satisfied, you can typically cancel the contract and get your earnest money refunded. Common refundable scenarios include:

• Financing Contingency: You are unable to secure a mortgage loan.
• Inspection Contingency: The home inspection reveals significant, undisclosed defects.
• Appraisal Contingency: The property appraises for less than the agreed-upon purchase price.

Once these contingencies are satisfied or their deadlines pass, the earnest money generally becomes non-refundable. If you then decide to back out of the deal, you risk forfeiting the deposit to the seller.

How Can You Protect Your Earnest Money Deposit?

To safeguard your financial commitment, follow these best practices based on our experience assessment:

• Work with a licensed real estate agent who can ensure contracts and deadlines are properly handled.
• Always pay using a secure, traceable method like a wire transfer or cashier's check directly to the title company named in the contract.
• Thoroughly understand all contingencies and deadlines outlined in your TREC contract.
• Get every agreement and contract change in writing, signed by both parties.

By clearly understanding the rules and deadlines, you can use your earnest money to strengthen your offer while minimizing financial risk.