When you purchase a home in Texas, signing the contract is only the beginning. The contract may require you to deliver earnest money and an option fee to the title company within a specific deadline.

These payments are not items to handle “when you get a chance.” The deadlines matter, and failing to pay on time can have serious consequences.

What Is Earnest Money?

Earnest money demonstrates that you are serious about completing the purchase. The amount is negotiated when your offer is prepared and is deposited with the title company named in the contract.

If the transaction closes, the earnest money is generally credited toward the amount you owe at closing. If the contract terminates, whether you receive it back depends on the contract terms and the reason for termination.

Under the standard Texas contract, failing to deliver earnest money on time can give the seller the right to terminate the contract or pursue other contractual remedies, provided the seller gives notice before the money is delivered.

What Is Option Money?

Option money, called the option fee in the contract, purchases a valuable contractual right: the unrestricted right to terminate during the negotiated option period.

The option period is when buyers typically conduct inspections, evaluate the property more carefully, obtain repair estimates and decide whether to proceed.

If you terminate properly before the option deadline, the seller generally keeps the option fee, but your earnest money is typically returned. If you close, the option fee is generally credited toward the sales price.

What Happens If the Option Fee Is Late?

This is where buyers must be especially careful.

If the option fee is not delivered within the time required, you may lose your unrestricted right to terminate during the option period. You may have other termination rights under the contract, but you should never assume that an inspection alone gives you the right to cancel.

The Deadline Begins Quickly

Under the standard Texas resale contract, earnest money and the option fee are generally due to the escrow agent within three days after the contract’s effective date. Calendar days are counted, although the deadline may be extended when the final day falls on a Saturday, Sunday or legal holiday.

Do not calculate this deadline yourself or wait until the last minute. Payment methods, title-company hours and banking delays can create problems.

We Will Prepare and Guide You

You are not alone!

During our buyer consultation, The Debra West Team will explain earnest money, option money, inspections, contract deadlines and other important parts of the buying process. We want you to understand these responsibilities before you enter into a contract.

Once your offer is accepted, we will guide you through each step, remind you of the deadlines and provide instructions for delivering the funds to the title company. However, the buyer is ultimately responsible for ensuring the payments are delivered on time.

These payments help secure the contractual rights and protections you negotiated. Missing a deadline can weaken those protections or potentially place the entire transaction at risk.

THE DEBRA WEST TEAM  |  RE/MAX ELITE GROUP