If you’re buying a home in Garland or anywhere in the DFW area, earnest money is one of the first real commitments you’ll make after finding a home you want. It’s not a fee — it’s a deposit that goes toward your purchase. But the rules around when it’s refundable, when it’s not, and how it works alongside the Texas option period trip up a lot of buyers who are new to the state or just haven’t been through this process recently.
Here’s a plain-English breakdown of how it works in Texas, what’s typical in the Garland market, and how to structure your deposit to protect yourself without weakening your offer.
What Earnest Money Is — and Isn’t
Earnest money is a good-faith deposit that signals to the seller you’re serious. In Texas, it’s held by an escrow agent — almost always a title company — and credited toward your purchase price or closing costs when the transaction closes. It is not a fee paid to anyone; it’s your money sitting in escrow until closing or until the contract terminates.
The amount, the escrow agent, and the delivery deadline are all spelled out in the Texas One to Four Family Residential Contract — the standard form used for most resale purchases in the state. The delivery deadline is negotiable, but in practice most buyers deposit earnest money within one to three business days after the contract’s effective date.
Always get a receipt from the title company when you deposit. Keep it — your lender will likely ask for it as part of your loan file.
Earnest Money vs. the Option Fee: Two Different Things
Texas uses two separate payments in most residential contracts, and buyers frequently confuse them.
The option fee is paid directly to the seller — not to the title company — in exchange for the unrestricted right to terminate the contract during the option period. It’s typically a small amount, but it buys you the ability to walk away for any reason during your inspection window without losing your earnest money. The option fee is almost never refunded; it’s the seller’s compensation for taking the home off the market while you do due diligence.
Earnest money is held in escrow and is refundable if you terminate under a contract right — most commonly by exercising the option period. If you send written notice of termination before the option period expires and follow the contract’s delivery rules, your earnest money comes back. The option fee stays with the seller either way.
Understanding this distinction matters: the option period is your safety valve for the earnest money deposit. Use it.
What’s Typical in Garland and the DFW Area
Earnest money amounts aren’t fixed — they’re negotiated and reflect the price point and how competitive the market is. Here’s what typical looks like in the Garland area:
Under $300,000: Flat deposits of $1,000 to $3,000 are common. Some sellers in this range may expect closer to 1% of the purchase price.
$300,000 to $500,000: 1% of the purchase price is the standard guideline most agents work from. On a $400,000 home, that’s $4,000.
$500,000 and above, or competitive multiple-offer situations: 1% to 2% is more common, sometimes higher when a buyer wants to signal strong commitment in a competitive scenario.
Option fees in the DFW area typically run $100 to $500 for standard single-family homes. In competitive markets, buyers sometimes increase the option fee or shorten the option period to make their offer more attractive.
A few practical examples at different price points:
On a $250,000 home: earnest money around $2,500, option fee $150–$200, option period 7 days.
On a $400,000 home in a competitive neighborhood: earnest money around $4,000, option fee $250–$300, option period 5 days.
On a $600,000 home with multiple offers: earnest money $6,000–$9,000, option fee $400–$500, or option waived entirely by a very confident buyer.
How the Timeline Works
The clock starts on the effective date — the date all parties have signed and the contract is fully executed. From there:
Option fee delivery: Due to the seller typically within a day or two per the contract terms — confirm the exact deadline with your agent before you sign.
Earnest money delivery: Due to the title company within the timeframe specified in your contract — commonly one to three business days after the effective date. Don’t let this slide; a missed earnest money deadline can put your contract in default.
Option period: Runs from the effective date for however many days you negotiated — commonly 5 to 10 days for a standard resale. Schedule your inspector immediately when the contract goes effective. Option days move fast, and rescheduling an inspector mid-option-period is a common source of stress.
Closing: Earnest money is credited on your closing statement. Your lender will want documentation that the deposit was made, so keep your receipt accessible throughout the transaction.
When You Can Get Your Earnest Money Back
If you terminate during the option period: Send written notice before the option period expires, follow the delivery rules in the contract, and your earnest money is refunded. This is the cleanest and most common scenario.
If a financing or appraisal contingency is triggered: Most standard contracts include protections if you can’t get financing approved or if the home doesn’t appraise. If you terminate under those provisions on time and per the contract’s notice requirements, you’re typically entitled to a refund.
If there’s a title issue: If the seller can’t deliver clear title, you generally have the right to terminate and recover your deposit.
If the buyer defaults: If you simply decide not to close without a valid contract right to terminate, the seller may be entitled to keep the earnest money as damages — and in some cases pursue additional remedies. The contract language governs what’s available. This is why understanding your termination rights before you waive the option period is so important.
How Disputes Are Handled
The title company follows the written contract. If both parties agree on what happens to the deposit, the title company releases funds accordingly. If there’s a dispute and the parties can’t agree on a release, the title company holds the funds until the dispute is resolved — either through a written mutual release or a court order. Don’t expect the title company to make a judgment call; they won’t.
If you find yourself in a disputed situation, save every piece of written communication — termination notices, delivery confirmations, and any correspondence about the dispute. And if meaningful money is at stake, consult an attorney.
Budgeting Before You Make an Offer
Have your deposit plan ready before you find a home you want to buy. In a competitive market, the time between finding the right house and getting an offer accepted can be hours, not days. Knowing your numbers in advance removes one decision from a high-pressure moment.
For a $350,000 target home, a reasonable upfront budget looks like this: earnest money around $3,500 (1%), option fee around $200, and inspection fees of $350 to $600 depending on the size of the home and any specialized tests you add (roof, foundation, HVAC, sewer line). These aren’t costs you lose — the inspection fee is paid directly to your inspector, the option fee is small, and the earnest money comes back to you at closing.
Strengthening Your Offer Without Overexposing Yourself
A higher earnest money deposit can make an offer more competitive, but it’s not the only lever. A shorter option period signals confidence and reduces the seller’s uncertainty. A strong preapproval letter from a local lender with a track record of closing on time matters more to many sellers than an extra thousand dollars in escrow.
If a seller pushes for more earnest money than you’re comfortable with, you can negotiate. Offer a faster close, tighter option period, or better documentation of your financing strength. The right structure depends on the specific property and seller situation — your agent should be reading those signals and advising accordingly.
If you’re ready to start the process or have questions about how to structure your offer in a specific Garland neighborhood, reach out to The Dunnican Team. We walk buyers through this every week and will make sure you’re protected at every step.
Frequently Asked Questions
Is earnest money the same as a down payment?
No. Earnest money is a deposit held in escrow that gets credited toward your purchase price at closing. Your down payment is the portion of the purchase price you’re paying out of pocket, calculated at closing. They’re separate — though your earnest money does count toward your total funds to close.
What’s the difference between the option fee and earnest money?
The option fee is paid directly to the seller for the right to terminate during the option period. It’s almost never refunded. Earnest money is held in escrow and is refundable if you terminate under a valid contract right — most commonly by exercising the option period.
What happens if I miss the earnest money deadline?
A missed earnest money deadline can technically put you in default on the contract. Contact your agent and the title company immediately if you’re at risk of missing it — most issues can be resolved if you communicate early.
Can I get my earnest money back if the home doesn’t appraise?
If your contract includes an appraisal contingency and you terminate under that provision on time and per the contract’s notice requirements, yes. Review your specific contract language with your agent before you waive any contingencies.
How long does it take to get my earnest money refunded after termination?
If the termination is clean and both parties sign a release, most title companies process refunds within a few days to two weeks. Ask your escrow officer for a current estimate at the time of termination.
Do I need earnest money if I waive the option period?
You can waive the option period, but doing so means you give up the unrestricted right to terminate. Your earnest money would only be refundable under other specific contract rights — financing, appraisal, or title. Waiving the option period is a significant commitment and should only be done with a clear understanding of what you’re giving up.
