Confused about why your Texas offer includes two checks? You are not alone. First-time buyers and relocating families in West El Paso often ask how earnest money and the option fee work together. In this guide, you will learn what each payment means in a Texas contract, when money can be refunded, typical amounts in 79912, and a simple way to budget before you write an offer. Let’s dive in.
Earnest money vs option fee basics
Earnest money is a good faith deposit listed in the standard Texas residential contract. You deliver it to the escrow agent named in the agreement, usually a title company. The escrow holder keeps it until you close or until the contract says it should be released.
Option fee pays for your short, negotiated option period, which gives you an unrestricted right to terminate. You typically pay the seller directly or as directed in the contract. Many contracts state the option fee will be credited at closing if you proceed.
Where they appear in the contract
Both payments are separate line items in the TREC One to Four Family Residential Contract (Resale). Each has its own amount, delivery instructions, and timing. Missing a deadline can change your rights or costs, so watch dates closely.
Timing that matters
- Earnest money is usually due within a few days after the contract’s effective date and must go to the named escrow agent.
- Option fee is due quickly as well and is tied to the start of your option period. The option period is short, so get inspections scheduled right away.
When each is refundable
Earnest money can be refundable if you terminate under a valid contract contingency and on time. Common examples include using your option period to terminate after inspections or ending under a financing contingency within the contract’s timelines.
If you do not terminate properly or you default, the seller may be entitled to keep the earnest money under the contract’s remedies. Escrow holders often require written instructions from both parties or a court order before releasing disputed funds.
Option fee is generally not refundable if you use your option to terminate. It compensates the seller for taking the property off the market during your option period. If you close, many contracts provide that the option fee is credited at closing. If a seller breaches, other remedies may apply based on the contract.
Typical amounts in 79912
Local norms vary with price point and competitiveness, but these ranges are common starting points in Texas and align with West El Paso practice:
- Earnest money: Often 1 to 2 percent of the price. In hotter scenarios, buyers may offer more.
- Option fee: Commonly 100 to 500 dollars for 3 to 10 days.
Here are illustrative examples for West El Paso. These are not rules, just practical guides you can adjust to today’s market:
- Example A, modest-priced home at 220,000 dollars: 2,200 earnest money (1 percent) and a 200 option fee for 7 days.
- Example B, mid-priced home at 350,000 dollars: 3,500 earnest money (1 percent) and a 250 option fee for 7 to 10 days.
- Example C, multiple-offer situation: 7,000 earnest money (2 percent) and a 500 option fee, with a shorter 2 to 3 day option period or a waived option period.
How these payments influence negotiations
Both payments signal how serious you are.
- Earnest money: A higher amount shows strong commitment and financial readiness. Sellers often view larger deposits as safer.
- Option fee and period: A higher fee or a shorter period signals you will move quickly on inspections. Waiving the option period can be persuasive in a tight market, but it increases your risk.
Smart combination ideas:
- Seller-friendly: higher earnest money, short or waived option period, and a quick closing timeline.
- Buyer-protective: typical 1 percent earnest money, a reasonable option fee (200 to 300 dollars), and 5 to 10 days for inspections.
Non-monetary ways to strengthen your offer include a current lender pre-approval, proof of funds for down payment and deposits, flexible closing dates, and only the contingencies you truly need.
Budgeting rubric for your offer
Use this simple framework to plan cash you may need right away when you write an offer in 79912:
- Set your likely purchase price based on current listings and comps.
- Estimate earnest money:
- Typical market: 1 percent of price (round to the nearest 100 dollars).
- Competitive market: 2 percent or more if advised.
- Choose an option fee and period length:
- Conservative protection: 200 to 350 dollars for 5 to 10 days.
- Competitive posture: 350 to 500 dollars or consider waiving the option period if you accept the added risk.
- Plan total cash on hand at offer time = Earnest money + Option fee + 1 to 2 months of mortgage reserve + estimated closing costs.
Quick example budgets:
- Buyer A, 225,000 dollars: Earnest 2,250 (1 percent), Option 200. Total to have upfront: 2,450 plus closing funds and reserves.
- Buyer B, 380,000 dollars in a competitive setting: Earnest 7,600 (2 percent), Option 500. Total to have upfront: 8,100 plus closing funds and reserves.
Delivery and deadlines in Texas
- Confirm exactly who receives each payment and how. Earnest money typically goes to the title company named in the contract, while the option fee is paid to the seller or as instructed in the contract.
- Deliver both on time. The contract sets firm deadlines for depositing earnest money and for exercising your option.
- Keep receipts. Save escrow acknowledgements and proof of delivery for both payments.
- If a dispute arises over earnest money, expect the escrow agent to hold funds until both parties sign a release or a court order resolves it.
Quick 79912 buyer checklist
- Get a current lender pre-approval and proof of funds.
- Discuss market conditions in West El Paso with your agent and right-size your earnest money and option fee.
- Choose an option period that fits your inspection schedule.
- Confirm delivery instructions and deadlines for both payments.
- Save all receipts and confirmations.
Ready to make a confident offer?
You do not have to guess your way through deposits and timelines. With local guidance tailored to West El Paso neighborhoods, you can balance protection and competitiveness while staying on budget. If you want a clear plan for your next offer in 79912, connect with the friendly, hands-on team that knows these streets well. Reach out to Tracie Musshorn to get started.
FAQs
What is the difference between earnest money and the option fee in Texas?
- Earnest money is a good faith deposit held in escrow under the contract, while the option fee pays for a short option period that gives you an unrestricted right to terminate.
Is my option fee refundable if I end the deal during the option period?
- Typically no, the option fee is non-refundable if you terminate during the option period, though many contracts credit it at closing if you proceed.
How much earnest money should I plan for on a 350,000 dollar home in 79912?
- A common target is 1 percent, or 3,500 dollars; in a competitive situation, 2 percent or more can strengthen your offer if advised by your agent.
How quickly do I need to deliver earnest money in Texas?
- The contract sets the deadline, often within a few business days of the effective date, so confirm the exact timeline and deposit promptly with the escrow agent named in the contract.
Can a seller keep my earnest money if I back out after inspections?
- If you terminate after the option period without another valid contingency, the seller may claim the earnest money under the contract’s remedies; if you terminate properly within the option period, your earnest money is typically returned.
Who do I pay for the option fee in a Texas contract?
- The option fee is typically paid to the seller or as directed in the contract, separate from the earnest money that goes to the escrow agent.
What signals a strong offer in West El Paso besides more money?
- A recent pre-approval letter, proof of funds, flexible closing timing, and only essential contingencies can all help demonstrate seriousness in 79912.
