You found a home you love in Alamo Heights or Uptown Central, and now the seller is asking about earnest money. If you are not sure how much to put down or what happens if plans change, you are not alone. This guide breaks down the Texas basics, local Bexar County norms, and the simple steps to protect your deposit from contract to closing. You will walk away knowing how earnest money works, what is typical in these neighborhoods, and what to do if a deal falls through. Let’s dive in.
Earnest money basics
Earnest money is a good-faith deposit you pay after your offer is accepted to show you are serious about buying. A title company or escrow agent holds it until closing. If the sale closes, the money is credited toward your purchase price, down payment, or closing costs. If the deal ends under a valid contract contingency, you can usually get it back.
Earnest money gives the seller confidence that you intend to close and gives the escrow company funds to hold while you work through inspections and financing. It is not the same as your down payment, monthly rent, or a security deposit on a rental. It is also separate from the option fee.
How it works in Texas
The contract controls
Most Texas resale homes use TREC-promulgated contracts. In these forms, you fill in the earnest-money amount, who holds it, and when it is due. The written contract governs everything about deadlines, notices, and what happens if someone defaults.
Who holds the money
The contract names the escrow agent, most often a title company in Bexar County. Sometimes a broker may receive funds, but they must follow Texas trust-account rules. The key is to name a licensed, reputable escrow holder in the contract.
Deposit timing
You and the seller agree on the delivery deadline in the contract. A common practice is 1 to 3 business days after the effective date, but this is negotiable. Always follow the exact timing written in your contract.
Credit at closing
If you close, your earnest money is applied to your final cash to close. If you terminate under a covered contingency and meet the notice deadlines, you typically receive a refund.
Earnest money vs option fee
The option fee is a separate, non-refundable payment for the right to terminate during the option or inspection period. You usually pay the option fee directly to the seller. Buyers use this period to do inspections and negotiate repairs.
Option periods often run 3 to 10 days in Texas. In sought-after neighborhoods like Alamo Heights, sellers may prefer shorter option periods and higher option fees when the market is competitive.
Local norms in Uptown Central and Alamo Heights
In balanced markets, buyers often offer a flat amount of earnest money, such as a few thousand dollars, or about 1 percent of the price. In competitive conditions with multiple offers, you may see 1 to 3 percent or more to strengthen an offer. Higher-priced homes may use a larger fixed sum or a percentage, depending on expectations.
Local title companies typically hold the deposit. When inventory is tight, expect faster deposit timelines and shorter option periods. Ask your agent for the most recent accepted-offer ranges by neighborhood and price band. A quick check of current norms keeps your offer competitive without taking on more risk than you need.
Protecting your deposit
Use contingencies the right way
Texas contracts include tools that protect your earnest money if used on time. These include the option period, financing and appraisal protections, and title review objections. If you terminate within the set timelines and give proper written notice, you can usually secure a refund of your earnest money.
Watch every deadline
Put the option period end date, financing deadlines, and title objection dates on your calendar. Give notices in the manner required by the contract. Keep email confirmations and delivery receipts.
Deliver funds correctly
Follow the escrow instructions in your contract. Use a traceable payment method, such as a wire to the title company or a cashier’s check, and save the receipt. Ask the escrow agent for written confirmation that funds were received.
If plans change: common outcomes
Terminating during the option period
If you end the contract during the option period, the seller keeps the option fee. Your earnest money is typically refunded when you give timely notice under the contract.
Financing or appraisal issues
If you cannot obtain financing or the home does not appraise and you exercise your contractual rights on time, your earnest money is usually refunded. The exact result depends on the wording and deadlines in your contract.
Buyer default without a valid termination
If you fail to close without using a valid termination right, the seller may be entitled to your earnest money as liquidated damages, and they may seek further remedies. The escrow agent will need proper documentation or a signed release before disbursing funds.
Seller breach or title problems
If the seller cannot meet contract obligations or there are title issues, you can usually terminate per the contract and recover your earnest money. Other remedies may also be available under the contract.
Disputes over release
If buyer and seller disagree, the escrow agent generally holds the funds until both sign a release or a court orders distribution. Some escrow holders may interplead the funds to a court to resolve the dispute.
Buyer checklist
- Get preapproved and confirm your financing timeline before you write an offer.
- Ask your agent for current earnest-money norms for your price range in Alamo Heights or Uptown Central.
- Decide on an earnest-money amount that balances competitiveness and risk.
- Fill in the escrow agent’s name, earnest-money amount, and deposit deadline in the contract.
- Set your option period length and option fee; align inspection timing with the option window.
- Include financing and appraisal timelines you can realistically meet.
- After acceptance, deliver earnest money as instructed and keep proof of receipt.
- Track all deadlines and send notices in writing per the contract.
- If you terminate properly, request the refund in writing with your termination notice.
Seller checklist
- Confirm who will hold the earnest money and how quickly the buyer will deposit it.
- Consider whether a higher earnest-money amount and a shorter option period fit your risk and timing goals.
- After acceptance, verify the escrow agent received the funds and keep written confirmation.
- Understand the buyer’s termination rights and timelines so you know when refunds may occur.
- If the buyer defaults, review the remedies paragraph and consult your broker or attorney before claiming earnest money.
Escrow and documentation tips
- Name a licensed, reputable title company or escrow agent in the contract.
- Use traceable payment methods and save receipts or screenshots.
- Make checks payable to the named escrow agent as the contract directs.
- Keep copies of the executed contract, addenda, delivery receipts, and any termination notices.
- If a broker holds funds, ask for a written receipt and confirmation of trust-account handling.
When to involve professionals
- Title or escrow officer: for deposit confirmations and release procedures.
- Your real estate agent: for strategy on amount, timing, and drafting clean contract terms.
- A real estate attorney: for disputes, complex remedies, or if litigation is likely.
- Your lender: for dates tied to financing approval and appraisal.
The bottom line
Earnest money in Texas is simple once you focus on the contract and the calendar. Typical local ranges in Bexar County are often around 1 percent in balanced markets and higher in competitive offers, with shorter option periods in neighborhoods like Alamo Heights. Protect your deposit by naming a solid escrow agent, delivering funds on time, and meeting every notice deadline. With clear terms and local guidance, you can write a strong offer and keep your risk in check.
Ready to tailor an earnest-money strategy to your price point and neighborhood? Reach out to Blain Johnson for local guidance and a clear plan from offer to closing.
FAQs
How much earnest money is typical in Alamo Heights?
- In balanced markets, buyers often offer a few thousand dollars or about 1 percent of price; in competitive situations, 1 to 3 percent or more is common.
When is earnest money due under Texas contracts?
- The TREC contract sets a specific deadline, often 1 to 3 business days after the effective date, but the exact due date is negotiated in writing.
Is earnest money refundable if financing fails?
- If your contract includes financing or appraisal protections and you give timely written notice, earnest money is typically refunded.
Who holds earnest money in Bexar County?
- A title company or escrow agent named in the contract usually holds it; some brokers may receive funds if properly designated and handled under trust rules.
What happens if buyer and seller disagree on the deposit?
- The escrow agent usually holds the funds until both parties sign a release or a court orders distribution, and may interplead the funds if needed.
