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Key takeaways:
If you’re buying a home in Texas, you’ve probably heard the term earnest money, the deposit that shows a seller you’re serious about your offer. In most cases, earnest money in Texas ranges from 1% to 3% of the home’s purchase price, but the exact amount can vary depending on market conditions and your agreement with the seller. According to the Texas Real Estate Commission (TREC), buyers must deliver their earnest money to an escrow agent within the time frame listed in the contract; if the money isn’t delivered on time, the seller can terminate the deal or pursue remedies outlined in Paragraph 15 of the TREC contract.
In real estate, a contract is only binding if there’s “consideration,” meaning both sides are offering something of value. In this case, the buyer’s promise to buy and the seller’s promise to sell fulfill that requirement. Because earnest money plays such a key role in this exchange, understanding how much to put down and when to deliver it can help you avoid delays or even losing out on your dream home.
What is earnest money?
Earnest money is a good-faith deposit that buyers include with their offer to show they’re serious about purchasing a home. It acts as a sign of commitment and gives the seller confidence that the buyer won’t back out without reason.
Once the offer is accepted, the earnest money is typically held in an escrow account managed by a title company or brokerage until closing. If the sale is completed, the deposit is applied toward the buyer’s down payment or closing costs. If the deal falls through for a reason covered by the contract, such as a failed inspection or financing contingency, the buyer may get their deposit back.
When is earnest money delivered?
In Texas, earnest money is typically due within three business days after the contract is signed; however, the exact deadline depends on the terms outlined in your purchase agreement. According to the Texas Real Estate…
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