Feeling unsure about how earnest money works in Texas, or what to offer in Frisco? You are not alone. Earnest money helps your offer stand out, but it also puts real dollars at risk if you miss a deadline or waive protections. In this guide, you will learn what earnest money is, how it is handled in Texas contracts, typical amounts seen in Frisco, when it is refundable, and how to protect it from start to finish. Let’s dive in.
Earnest money basics
Earnest money is a deposit you make when you submit an offer to buy a home. It shows the seller that you are serious and creates a financial incentive to complete the purchase. If the sale closes, your earnest money is applied to your closing funds. If the deal falls apart, the contract decides who keeps it.
In Texas, earnest money is governed by the written purchase contract. It is not a special type of account set by law. The contract spells out the amount, where the funds go, deadlines, and what happens if you or the seller default.
Do not confuse earnest money with the Texas option fee. The option fee is paid to the seller for the right to terminate during the option period. The option fee is usually non-refundable, while earnest money can be refundable if you end the contract under a valid term.
How Texas contracts handle it
Most Frisco resale purchases use Texas Real Estate Commission forms. These contracts include your earnest money amount, the escrow holder, and delivery deadlines. In practice, buyers commonly have about three business days after the effective date to deliver the deposit. Always confirm your contract’s exact timing.
The escrow holder is usually the title company named in the contract. Title companies hold the funds and follow the written instructions from the parties. If you pay by personal check, the title company may treat it as pending until it clears.
Accepted payment types vary by title company. Cashier’s checks, personal checks, wires, and some electronic transfers are common. Ask the title company which methods they accept before you send funds.
Typical amounts in Frisco
There is no statewide rule for how much to offer. In balanced markets, buyers often put up a few thousand dollars or roughly 1 percent of the price. In more competitive segments, you may see 1 to 3 percent or flat amounts like 5,000 to 25,000 dollars, depending on price and demand.
Frisco has been a high-demand suburb in the Dallas–Fort Worth area. In tighter inventory periods, larger deposits and stronger terms can help your offer stand out. The right number for you depends on your budget, the home’s price point, and current market conditions.
New construction and builder contracts can require different earnest money structures. Builders often set their own rules, so read those contracts carefully and confirm how and when deposits become non-refundable.
Refundable vs. forfeited
When it is refundable
- Option period: If you purchased an option period and terminate within that window, your earnest money is typically refundable. The option fee usually stays with the seller.
- Financing contingency: If your loan is denied and you follow the contract’s notice steps on time, you can usually end the contract and keep your earnest money.
- Appraisal terms: If the home does not appraise to the needed value and no agreement is reached, you may be able to terminate per your contract and preserve your deposit.
- Title issues: If title defects cannot be cured within contract timelines, you can often terminate and receive your earnest money back.
- Seller default: If the seller fails to perform under the contract, you may be entitled to a refund.
The key is timing and notices. You must follow the contract’s written termination rules exactly, including deadlines and delivery method, to secure a refund.
When you could lose it
- Buyer default: If you fail to close without a valid contract right to terminate, the seller may be able to keep the deposit as liquidated damages, subject to the contract.
- Waived protections: If you waive inspection, financing, or other contingencies, then back out, your earnest money is at greater risk.
- Missed deadlines: If you do not send required notices in time, you can lose the right to reclaim your funds.
Disputes and releases
Title companies hold your funds and follow the contract. If there is a dispute about who keeps the deposit, the title company will usually require a written release signed by both parties. Without a mutual release, the title company may keep holding the funds or deposit them with the court, depending on the contract’s dispute steps.
If you believe you have a contractual right to the earnest money but the seller will not sign a release, consult a real estate attorney promptly. Legal counsel can advise you on next steps.
Buyer steps to protect your deposit
Before you write an offer
- Set your deposit strategy: Align your earnest money with current Frisco market conditions and your risk tolerance.
- Choose an option strategy: Decide whether to buy an option period for unrestricted inspection and termination rights.
- Get preapproved: A strong preapproval lowers the risk of a financing denial that could put your deposit at risk.
When you write the offer
- Name the escrow holder: Identify the title company in the contract and confirm deposit methods.
- Lock in deadlines: Make sure the contract states the earnest money and option deadlines clearly.
- Confirm payment method: Ask the title company which deposit types they accept, and plan accordingly.
After acceptance and during escrow
- Deliver on time: Deposit the earnest money within the contract timeframe and obtain a receipt.
- Keep records: Save proof of delivery and any email confirmations from the title company.
- Stay on top of lending: Meet appraisal and underwriting dates to keep your financing contingency in place.
If you need to terminate
- Follow the contract: Send the correct termination notice before the deadline, using the required delivery method.
- Document everything: Have your agent or attorney send and keep written proof of notices and timelines.
- Seek counsel if needed: If the seller will not release funds and you have a valid right to a refund, speak with a real estate attorney.
Wire fraud precautions
Wire fraud targeting real estate transactions is a serious and growing risk. Take these steps before you send any money:
- Verify wiring instructions with the title company by calling a trusted phone number from an independent source.
- Be cautious of last-minute changes to wiring details.
- Do not rely only on email. Confirm by phone with a verified contact.
- If you are unsure, ask about using a cashier’s check or an in-person deposit.
Frisco negotiation tips
- Match the market: In competitive segments, consider a larger earnest money deposit paired with a shorter option period. Balance that with your comfort level and financing plan.
- Keep protections you need: If you increase your deposit, maintain clear deadlines and contingency protections so you can step back if needed.
- New build nuances: Builder contracts often have different refund rules. Ask for clarity on financing timelines, appraisal handling, and what happens if the builder delays.
Quick timeline
- Effective date: Your contract starts when both parties sign and acknowledge the effective date.
- Deposit window: You commonly have about three business days to deliver earnest money. Check your contract for the exact deadline.
- Option period: If purchased, complete inspections and decisions within this window, then negotiate or terminate as needed.
- Title review: Review your title commitment promptly and raise objections within contract timelines.
- Appraisal and loan: Work with your lender to meet appraisal and approval milestones.
- Closing: If all terms are met, your earnest money applies to your closing funds.
Work with a local advisor
You deserve a clear plan that fits the Frisco market and protects your deposit. Our team guides you on the right earnest money amount, the option period strategy, and the contract timelines that keep your funds safe. When the market is competitive, we help you strengthen your offer without taking on avoidable risk.
Ready to buy with confidence in Frisco? Connect with Cardoza Group, Inc for a friendly, step-by-step strategy tailored to you.
FAQs
How does earnest money work in Texas?
- Earnest money is a buyer deposit held by a title or escrow company under the contract. It applies to your closing funds or is distributed per contract rules if the deal does not close.
How much earnest money do Frisco buyers offer?
- It depends on price and market conditions. Common practice ranges from a few thousand dollars to about 1 to 3 percent in more competitive scenarios.
Is earnest money the same as the option fee?
- No. The option fee buys you an option period to terminate for any reason. Earnest money is escrowed and can be refundable if you terminate under a valid contract right.
When do I get my earnest money back?
- If you terminate under a valid contingency, such as the option period, financing, appraisal terms, or title issues, and you send notices on time, the deposit is typically refundable.
Can the seller keep my earnest money if I back out?
- If you default without a valid termination right or miss deadlines, the seller may be able to keep the deposit as liquidated damages under the contract.
What happens if the title company will not release funds?
- Title companies usually require a mutual written release. If parties disagree, the title company may hold funds or deposit them with the court. Consult an attorney for guidance.
