Quick Answer
Earnest money is the good-faith deposit you submit with your offer, and in Texas it currently runs about 1% to 3% of the purchase price. On a $300,000 home, that is roughly $3,000 to $9,000. Market norms and how competitive the listing is move the number up or down. The money is held in escrow, credited toward your purchase at closing, and refundable if you back out the right way.
In Texas, earnest money typically ranges from 1% to 3% of the purchase price, which on a $300,000 home comes to $3,000 to $9,000. It is not an extra cost: the deposit is held in escrow and then credited toward your down payment and closing costs at closing. And no, you do not automatically lose it if you back out. Terminate properly during your option period, or use another valid right in the contract, and your earnest money comes back. You lose it only when you default without a valid right to terminate or blow a contract deadline.
Typical Amounts (1% to 3%)
In Texas, earnest money deposits typically range from 1% to 3% of the purchase price. For a $300,000 home, that is $3,000 to $9,000. In competitive markets, or on higher-priced properties, sellers often expect deposits at the higher end of the range. Your agent will help you pick the number that fits your market and your offer strategy.
Worked Example: A $300,000 Home
Here is the deposit range in real numbers, and what each level means.
Every one of these amounts is credited back to you at closing. Earnest money is not a fee on top of the price; it becomes part of the down payment and closing funds you were already going to bring.
What the Earnest Money Actually Does
The title company holds your earnest money in escrow, not the seller, and that money does not go to the seller during the option period. At closing, the deposit is credited toward your purchase, which means it reduces the cash you bring to the table. Think of it as prepaying part of your closing costs and down payment. It is not an extra cost, it is part of the money you were already planning to bring.
Do You Lose It If You Back Out?
No, not automatically. Under the current Texas rules, your earnest money comes back if you terminate the contract properly. That means ending the deal during your option period, or using another valid termination right written into the contract, such as the financing or appraisal addendum. You also get it back if the seller breaches the contract. The title company returns the funds once both parties sign the release, typically within 5 to 10 business days.
Your option period is the main window where you can walk away for almost any reason and keep your deposit. Not sure how that period works or which dates matter? Read this plain-English guide to the Texas option period.
When You Actually Lose It
You lose your earnest money when you default without a valid right to terminate. Say the option period has expired, your financing and appraisal deadlines have passed, and you simply change your mind: the seller may be entitled to keep the deposit as compensation for taking the home off the market. Blowing a contract deadline, like the date your financing approval is due, can put you in default too. Mid-contract and wondering where you stand?
Here is what happens if you back out after your offer is accepted.
Reality Bites
A seller does not have to hand your money back just because you had a change of heart. Once your option period is gone and no valid termination right is left, the deposit can go to the seller, and getting it back means negotiating with them after the fact. Show up to your own deadlines. That is the whole game.
Earnest Money vs Option Fee
These are two different piles of money, and buyers mix them up all the time. The option fee buys you the right to walk away for any reason during the option period. It is paid directly to the seller, typically $100 to $500, and it is customarily nonrefundable. The earnest money is your good-faith deposit, held by the title company, refundable when you terminate within the option period, and credited to your purchase at closing. Different money, different jobs.
Earnest Money vs Option Fee at a Glance
| Earnest Money | Option Fee | |
|---|---|---|
| What it is | Good-faith deposit that shows you are serious | Payment that buys you the right to cancel |
| Typical amount | 1% to 3% of the price ($3,000 to $9,000 on a $300,000 home) | $100 to $500 |
| Who holds it | Title company, in escrow | The seller |
| Refundable? | Yes, if you terminate properly during the option period or a valid contingency | No, customarily nonrefundable, it is the seller's to keep |
| At closing | Credited toward your down payment and closing costs | Not credited back to you |
How Much to Offer (Market Conditions Matter)
In a hot seller's market, offering more earnest money can make your offer stand out, because a larger deposit signals that you are serious and financially qualified. In a balanced market, 1% to 2% is typically enough. In a multiple-offer situation, a stronger deposit can be the tie-breaker, but it should never drain the cash you need for closing.
Patriot Pro Tip
Because I work both sides of the deal, as your Realtor and your loan officer, I structure the offer so a realistic deposit does the job and your financing carries the weight. A clean pre-approval and a solid financing plan can beat a bigger deposit every time. Offer strong, but keep your cash-to-close in mind.
Texas Context: It All Lives in the Contract
In Texas, earnest money is written into the One to Four Family Residential Contract, and the deposit goes to the title company named in the contract, never to the seller personally. Your contract states the amount, the deadline for depositing it (usually within three days of the accepted offer), and every termination right you have. All of it comes down to the dates and terms on that page.
Warning: Read the Contract Before You Assume
Exactly what happens to your earnest money depends on the specific contract you sign: its deadline dates, the termination provision you use, and how the release is signed. Do not assume. Read the contract, mark every date, and confirm with your agent before you act. A missed deadline is the fastest way to turn a refundable deposit into a loss.