What Are Earnest Money and the Option Fee in Texas Real Estate?
In Texas, buyers make two separate upfront payments when a purchase contract is signed: earnest money and an option fee. Earnest money — typically 1%–2% of the purchase price — is delivered to the title company and held in a neutral escrow account; it's refundable if the buyer terminates correctly during the option period. The option fee is paid directly to the seller and is never refundable — but it purchases the buyer's unrestricted right to walk away during the option period without forfeiting the earnest money. If the deal closes, both payments are credited toward what the buyer owes at the table.
By Caroline Decherd & Susanne Marco | August 17, 2026
You're about to make an offer on a home in San Antonio. Your agent asks how much earnest money you want to put down. You say 1%. She says that's about right for the price point — and by the way, there's also an option fee.
A separate payment. Paid directly to the seller. Non-refundable.
If that caught you off guard, you're not alone. Texas is one of the only states where buyers make two distinct upfront payments at contract — and the difference between them matters most when deals go sideways.
The Two Payments Texas Buyers Make — and How They Differ
Earnest money is a good-faith deposit that signals serious intent. In Texas, it's held by the title company — a neutral escrow agent — not the seller, not your real estate agent. The amount is negotiable, but 1%–2% of the purchase price is the standard in San Antonio.
At the price points common in Alamo Heights, Terrell Hills, and Olmos Park, that's a significant number:
- $700,000 home: $7,000–$14,000
- $900,000 home: $9,000–$18,000
- $1.2M home: $12,000–$24,000
You have three business days from the date both parties sign the contract to deliver the earnest money to the title company named in the contract. If you close, it's credited toward your purchase price — it reduces the amount you owe at the table. If you terminate during the option period, you get it back.
The option fee is almost the inverse.
The option fee is paid directly to the seller — not the title company — within three business days of contract execution. In most Texas transactions, it ranges from $100 to $500. In San Antonio luxury contracts, you'll often see it negotiated higher — $500 to $1,000 or more. And unlike earnest money, the option fee is non-refundable under any circumstances. You don't get it back even if you terminate on day one of the option period.
What you get in exchange: the unconditional right to terminate the contract for any reason during the option period — time to complete your home inspection, review the title work, and decide whether to proceed — without having to explain yourself and without forfeiting your earnest money. The option fee buys you that window.
If the deal closes, the option fee is credited toward your purchase price at closing. You paid $750 to the seller; that $750 comes off what you owe at the table. You're only losing it permanently if you walk away from the contract.
What Happens to Each Payment If the Deal Falls Through
This is the question that matters most — and the answer depends on when and why the deal falls apart.
During the option period: Submit a Notice of Termination to the seller. Your earnest money is refunded. The seller keeps the option fee. This is the cleanest exit Texas real estate offers — you're out, the earnest money comes home, and the option fee was the cost of the exit window you used.
After the option period, without a valid contractual reason: The seller can typically keep the earnest money. Once the option period expires, your unconditional termination right is gone. If you back out at this point without a contract contingency protecting you — financing, appraisal, or otherwise — the seller has a legitimate claim to the earnest money deposit.
After the option period, due to failed financing: This depends on the contract. Most Texas residential contracts include a Third-Party Financing Addendum. If a lender denies your loan after good-faith efforts to qualify, you may be able to terminate and recover your earnest money — but the circumstances and documentation matter, and the burden is on you to show you made genuine efforts to secure the loan.
The practical rule: the option period is your safety valve. Terminate during it, and the earnest money is protected. After it expires, the earnest money is at risk if you leave without valid cause.
Buyers in a bridge loan situation — buying before selling in San Antonio — face this question with more at stake. You're not just managing one transaction's earnest money; you're managing risk on both sides at once.
What Sellers Expect — and What the Numbers Signal
In San Antonio, sellers in the Tri-Cities evaluate earnest money as one signal among several. A buyer who offers 1% on a $1M home is putting down $10,000. One who offers 2% is putting down $20,000. Sellers can't legally require a specific amount — but they notice the difference.
In competitive situations — well-priced homes in Alamo Heights, multiple-offer scenarios — a higher earnest money deposit can distinguish your offer from one at the same price with a lower deposit. It doesn't substitute for a strong price or clean terms, but it reinforces them.
The option fee works similarly. Most sellers in a luxury San Antonio transaction expect at least $500. A higher fee signals you're making a serious inquiry, not using the option period as a no-cost extended due diligence window.
Worth knowing from the other side: the Texas option period looks different to sellers — including why they often push for shorter option windows and higher option fees when they have competing interest.
For most buyers, the earnest money and option fee structure is something you encounter once and quickly understand. But knowing what each payment is, where it goes, and what happens to it if the deal changes gives you a clearer picture of what you're actually committing to when you sign a contract in San Antonio.
If you're working through an offer in Alamo Heights, Terrell Hills, Olmos Park, or anywhere in San Antonio's central neighborhoods and want to talk through how to structure your deposits given the specific property and your situation, schedule a call with Caroline or Susanne. Getting this right before the contract is signed is a lot easier than sorting it out afterward.
Frequently Asked Questions
Is earnest money required in Texas?
No. Texas law doesn't require earnest money — the TREC contract has a blank where the amount goes, and $0 is technically allowed. In practice, sellers expect it, and a zero-earnest-money offer will be viewed skeptically by almost any San Antonio seller. If you're making a competitive offer, earnest money is effectively required.
How long do I have to deliver earnest money and the option fee in Texas?
Both are due within three business days of the contract being fully executed — meaning signed by both buyer and seller. The option fee goes directly to the seller (or their agent). The earnest money goes to the title company named in the contract. Missing either deadline creates a contract default.
What happens if earnest money is delivered late in Texas?
Late earnest money is a contract default. The seller can send a notice giving you a window to cure it. If you don't deliver within that window, they can terminate and retain any option fee already paid. The three-business-day deadline is real — don't treat it as flexible.
Can the seller keep the earnest money if the buyer backs out?
It depends on when and why. During the option period — no; the buyer gets the earnest money back. After the option period, without a valid contractual reason — yes, the seller can make a claim to it. Disputes go to the title company, which typically holds the funds until both parties agree in writing or a court orders release.
Do I get the option fee back if I decide to close?
Yes — if you proceed to closing, the option fee is credited toward your purchase price. You don't lose it permanently unless you terminate the contract. Think of it as a deposit against your right to exit: if you don't use the exit, the deposit applies to your purchase.
About Caroline Decherd & Susanne Marco
Caroline Decherd and Susanne Marco are luxury real estate specialists serving Alamo Heights, Terrell Hills, Olmos Park, and San Antonio's historic central neighborhoods. With deep roots in the community and decades of combined experience, they guide buyers and sellers through one of Texas's most distinctive luxury markets.
