Home BuyingOctober 25, 2026

Earnest Money vs. Option Fee in Texas: What Buyers Should Know

Two payments. Different jobs. Understand what each payment does, when it is due, and what happens if you close or terminate during the option period.

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By Shane Lee · Information checked October 25, 2026

HOME BUYING · TEXAS RESALE CONTRACTS

Two payments. Two different purposes.

After your offer is accepted, earnest money and the option fee can be among your first payments. Understanding the difference helps you plan your cash and use your contract rights on time.

A deposit toward the purchase: Earnest money
Payment for a termination option: Option fee
Payment and termination deadlines: Separate clocks
Where the amounts and terms are set: Your contract

This guide focuses on TREC’s One to Four Family Residential Contract (Resale), Form 20-19, effective July 1, 2026. Builder and other contract forms may work differently.

START WITH THE DIFFERENCE

What does each payment do?

EARNEST MONEY

A deposit supporting your purchase.

This is money deposited with the escrow agent under the contract. Whether it is returned after a termination depends on the contract and the circumstances.

Texas REALTORS® · Earnest money explained

OPTION FEE

Payment for a negotiated right to terminate.

With a properly established termination option, you may end the contract for any reason during the agreed period by giving timely written notice. This is separate from the fee you pay a home inspector.

SIDE BY SIDE

Where the money goes.

Question	Earnest money	Option fee
Who receives it initially?	The escrow agent named in the contract.	The same escrow agent, who may release the fee to the seller.
What happens at closing?	Applied first to the cash down payment, then to buyer expenses; any excess is refunded.	Credited toward the sales price.
What if I properly use my option to terminate?	The contract provides for a refund, subject to escrow release procedures.	Not refunded for that option termination.
How much should I budget?	The amount agreed in your contract.	The agreed fee, alongside the agreed number of option days.

The figures are contract terms. The example below is not a required percentage, fee, or market standard.

WATCH BOTH DEADLINES

The payment deadline is not the option deadline.

DELIVER THE FUNDS

Within 3 days after the effective date.

Under this resale form, deliver both payments to the named escrow agent within three calendar days after the effective date. If the delivery deadline lands on a Saturday, Sunday, or Legal Holiday as defined in the contract, it moves to the next day that is none of those.

USE THE OPTION

Give notice by 5 p.m. local property time.

The negotiated option period is counted separately from the effective date. Day 1 is the next day. Weekends and holidays count, and the option deadline does not receive the payment-delivery extension.

Texas REALTORS® · Counting the days

The option clock does not wait for the inspection, the payment receipt, or the start of repair discussions.

BEFORE YOU MAKE AN OFFER

Build a plan for the offer and the first few days.

Tell me your price range, timing, and where you are in your search. We can plan the next steps before you commit to a home.

Start my buying plan See the buying process

AN EXAMPLE · NOT A QUOTE

What could this look like in dollars?

Assume a $500,000 purchase, $5,000 in earnest money, a $300 option fee, and a negotiated seven-day option. These are illustrative terms only.

If you close, the payments receive their respective closing credits.
If you validly terminate under the option, the $5,000 is refundable under the contract; the $300 option fee is not. Escrow release procedures still apply.

Illustrative earnest money: $5,000
Illustrative option fee: $300
$5,000 + $300 delivered initially: $5,300
Illustrative option period: 7 days

The $5,300 is not your full down payment or total cash needed to buy. Plan separately for the remaining down payment, closing costs, inspections, and other applicable expenses.

Texas Real Estate Research Center · Option outcomes

MAKE THE TIME COUNT

Use your option period to make a decision.

Schedule inspections early, review the findings, arrange appropriate specialist follow-ups, and discuss any repair requests. Leave time to decide whether to proceed, negotiate, or exercise an available termination right.

If more time is needed, an extension must be agreed to; a repair request does not create extra days.

Texas Real Estate Research Center · Option-period planning

COMMON QUESTIONS

The details buyers often miss.

Is the option fee an inspection fee?

No. The option fee pays for the contractual termination option. Your inspector charges separately for the inspection service.

TREC · What the option provides

What happens if I miss the option-fee deadline?

Paragraph 5D says that missing the required payment deadline, or leaving the fee amount unstated, means the buyer does not have the unrestricted termination right under paragraph 5. Contact your agent promptly rather than assuming a late receipt fixes it.

TREC · Failure to pay the option fee

Can I walk away by not paying the earnest money?

No. An otherwise binding contract can exist without that payment. Failure to perform can expose you to the seller’s contractual remedies; it is not a way to cancel.

Texas REALTORS® · Payment and a binding contract

Do ongoing repair talks extend the option period?

No. Arrange a written amendment signed by both parties before the existing period expires, with the extension date and appropriate additional option fee. Do not rely on an unfinished negotiation.

Texas REALTORS® · Extending an option period

Will my earnest-money refund arrive automatically?

A termination notice and an earnest-money release serve different purposes. Give proper notice under the contract, then follow the escrow agent’s release process. A dispute can delay the funds; seek legal advice if entitlement is contested.

Texas REALTORS® · Notice versus release

What changes after the option period ends?

The unrestricted option right ends. Other termination rights may remain, with their own conditions and deadlines. Canceling without an applicable right can create default exposure, including remedies beyond losing the deposit.

TREC · Contract rights and default, paragraphs 5–18

Does this apply to a builder’s new-home contract?

Do not assume so. This guide covers a resale form that TREC says is not for new homes sold by a builder. Have the actual builder agreement reviewed for deposits, cancellation rights, and deadlines.

TREC · Scope of the resale form

YOUR TEXAS REALTOR®

Know your next step before you sign.

Buying in Allen, Southlake, Frisco, McKinney, Prosper, or Celina? Share your goals and timing. I’ll help you organize the search, offer preparation, and the steps after acceptance.

Plan my North Texas home purchase Planning a new-home purchase?

Shane Lee with Limvesting Realty · License 0785031. This is general education; your signed contract and amendments control. Consult a Texas real estate attorney for legal advice or a contract dispute.

Sources and further reading

Information checked October 25, 2026 against the current TREC resale form and the resources below. Older explanatory pages are used only where consistent with Form 20-19.