Buying a home in Rowlett comes with a few line items that can feel confusing at first. Two of the most important are the earnest money and the option fee. They sound similar, but they serve very different purposes and affect your ability to back out of a deal.
If you are trying to write a winning offer while protecting your budget, understanding these two payments is key. In this guide, you will learn what each fee does under Texas contracts, what is typical in the Rowlett area, and how to decide the right amounts for your situation. You will also get a clear timeline so you do not miss important deadlines. Let’s dive in.
Earnest money vs. option fee: the essentials
In Texas, most resale homes use the TREC One to Four Family Residential Contract. That contract separates the earnest money from the option fee. Here is how they work.
Earnest money basics
Earnest money is a good-faith deposit that shows you intend to buy the home under the contract. You typically deliver it to the escrow agent named in the contract, often a title company in Dallas County. If the sale closes, it is credited toward your purchase.
What happens to earnest money if a deal falls apart depends on the contract and the reason for termination. If you terminate within a valid timing or contingency allowed by the contract, you generally get it back. If you default after deadlines, the seller may be entitled to keep it or pursue other remedies as the contract allows.
Option fee basics
The option fee is a separate, usually smaller payment that buys you a unilateral right to terminate the contract for any reason during the option period. You negotiate both the fee amount and the length of that period when you write the offer.
The option fee is typically non-refundable. If you use your option and terminate on time, the seller usually keeps the option fee, but your earnest money is typically returned to you per the contract.
Key differences to remember
- Purpose: Earnest money secures your performance under the contract. The option fee pays for your right to walk away during the option period.
- Who holds it: Earnest money goes to the escrow agent named in the contract. The option fee is paid to the seller or as the contract specifies.
- Refundability: Earnest money may be refunded depending on timing and contract rights. The option fee is normally non-refundable.
- At closing: Earnest money is credited toward your purchase price. The option fee usually is not, unless the contract states otherwise.
How Texas contracts handle these payments
Most Rowlett resale transactions use TREC-promulgated forms. That is important because the exact paragraphs and timelines in that form control what you can do and when.
Option period mechanics
- You and the seller agree on an option period in calendar days. Common practice is a short window so you can complete inspections.
- To terminate under this right, you must deliver written notice to the seller before the option deadline stated in the contract.
- You pay the option fee as the contract directs. The fee is the consideration for this right to terminate.
If you give timely notice within the option period, the contract typically requires the earnest money to be released back to you, while the seller keeps the option fee.
Earnest money and escrow
- The contract names the escrow agent, often a local title company. It also spells out how and when to deliver the earnest money.
- The escrow agent follows the contract and state law. If the parties disagree about who gets the earnest money, the escrow agent will not decide who is right. They usually require a signed release by both parties or a court order.
If a dispute arises
If you default after the option period or outside your contract rights, the seller may have remedies that can include keeping the earnest money as liquidated damages or seeking performance or damages. The exact outcome depends on the contract language and facts of the situation. If there is a dispute, contact your agent and consider consulting a Texas real estate attorney.
What is typical in Rowlett right now
Market conditions drive norms. In a competitive seller’s market, buyers often increase earnest money, pay a higher option fee, or shorten the option period to stand out. In a cooler market, buyers can ask for a lower option fee and a longer option period.
Observed ranges in Dallas County show that earnest money is often in the low thousands for many single-family homes, with amounts scaling with price and competition. Option fees are commonly smaller than earnest money and often range from under one hundred dollars to a few hundred dollars in many transactions. In hot listings, buyers may offer higher option fees or shorten the option period to be more competitive. These are not rules, just patterns. Your strategy should match today’s Rowlett conditions and your comfort level.
How to choose your amounts in Rowlett
You do not need a one-size-fits-all number. Use a simple framework to decide what is competitive and comfortable.
- Study recent offers on similar homes
- Ask your agent to share what local sellers are seeing in Rowlett and nearby Dallas County neighborhoods. MLS data and recent contracts show real expectations.
- Weigh speed versus certainty
- If a home is getting multiple offers, a larger earnest money deposit can signal strength. A short option period can also help, but only if you can schedule inspections immediately.
- Pair fee choices with risk tolerance
- A higher option fee can help your offer, but it is typically non-refundable. If you are risk-averse, keep the option period and fee modest, and rely on strong pre-approval and clean terms to compete.
- Match timing to your due diligence plan
- If you can get inspections done quickly, a shorter option period may be fine. If you need more time for specialized inspections, negotiate a bit longer.
- Use creativity without skipping protections
- Instead of waiving your option period, consider a shorter period paired with clear inspection scheduling. You might also offer a slightly higher earnest money deposit to show commitment.
Step-by-step timeline from offer to option deadline
A clear plan keeps you from missing deadlines and risking your money.
- When you submit your offer
- Your contract should include the earnest money amount, the escrow agent’s info, the option fee amount, and the option period length. Confirm every number and timeline in writing.
- After mutual acceptance
- The option period begins on the effective date defined in the contract. The clock runs in calendar days. Mark the deadline clearly.
- Delivering funds
- Follow the contract instructions for the earnest money and the option fee. Title companies accept different forms of payment. Confirm allowed methods and get a receipt.
- Wire safety
- Wire fraud is a real risk. Always verify wiring instructions directly with the title company using a phone number you independently confirm. Do not rely only on emails or links.
- Schedule inspections immediately
- Book inspections early in the option period so you have time to review results and negotiate or terminate if needed.
- Decide and deliver notice
- If you will terminate, give written notice before the option deadline and follow the contract’s notice delivery rules. If you proceed, keep working toward loan and appraisal milestones.
- Earnest money release
- If you terminate within the option period, request release of your earnest money from escrow per the contract. The escrow agent will follow the contract and any required release forms.
How refunds and releases work
Here is what typically happens in common scenarios.
- If you terminate within the option period: You generally receive your earnest money back. The seller typically keeps the option fee.
- If you terminate after the option period without a contract right: The seller may be entitled to keep your earnest money or pursue other remedies, depending on the contract and facts.
- If there is a disagreement: The title company will likely require a signed release from both parties or a court order before disbursing the earnest money.
Keep copies of all notices, receipts, and inspection reports. Clear records support a smooth release process.
Common pitfalls to avoid
- Missing the option deadline. A late notice can mean losing your right to terminate under the option clause.
- Not verifying wiring instructions. Always call a verified number for the title company before sending funds.
- Assuming an automatic refund. Earnest money follows the contract. If you terminate, follow the notice rules so escrow can release funds correctly.
- Skipping inspections. The option period is your window to learn about the home and make informed choices.
- Failing to get receipts. Always document payment and delivery of earnest money, option fee, and notices.
Guidance for Rowlett sellers
These same terms help you evaluate risk in offers you receive.
- A larger earnest money deposit can signal a committed buyer. It may provide more assurance if the buyer backs out after key deadlines.
- A short option period reduces the time your home is off-market without certainty. Balance speed with the buyer’s need to inspect.
- A higher option fee can show buyer seriousness. Weigh that against the overall strength of the offer, including price, financing, and timelines.
Your listing strategy should reflect current Rowlett market conditions. Strong pricing and clear terms attract buyers who can perform.
Work with a local team you can trust
You do not need to navigate these choices alone. A local, process-driven team can help you set the right earnest money, choose a smart option period, schedule inspections quickly, and keep every deadline on track. If you are also selling, you can coordinate timing, vendors, and negotiations with one point of contact.
If you are planning a move in Rowlett or across the DFW suburbs, connect with The Sarah Naylor Team for clear guidance from offer to close. Get Your Instant Home Valuation if you are curious what your current home could sell for, and let’s build a plan that fits your timeline.
FAQs
What is the difference between earnest money and the option fee in Texas?
- Earnest money is a good-faith deposit held by the escrow agent and credited at closing, while the option fee is a separate, typically non-refundable payment to the seller that buys you the right to terminate during the option period.
If I terminate during the option period in Rowlett, do I get my earnest money back?
- Generally yes. If you deliver written notice before the option deadline as the contract requires, the escrow agent typically returns your earnest money. The seller usually keeps the option fee.
How much earnest money and option fee are typical in Dallas County?
- Amounts vary with price and competition. Earnest money is often in the low thousands for many single-family homes, while option fees often range from under one hundred dollars to a few hundred dollars. Confirm current norms with your agent.
Can I waive the option period to strengthen my offer on a Rowlett home?
- You can, but it increases your risk. Consider a shorter option period, a slightly higher option fee, or a larger earnest money deposit as alternatives that keep some protection in place.
Who holds my earnest money and how is it released?
- The escrow agent named in the contract, often a title company, holds it. They release funds according to the contract and may require a signed release by both parties or a court order if there is a dispute.
What should I do to avoid wire fraud when sending earnest money?
- Verify wiring instructions directly with the title company using a phone number you obtain independently. Do not rely only on email or links, and confirm receipt of funds right away.
