Buying a home in Round Rock and seeing “earnest money” in every offer? You are not alone. This small deposit plays a big role in Texas contracts and protects both you and the seller while the home is under contract. In a few minutes, you will learn how earnest money works, what’s typical in Williamson County, when it is refundable, and how it differs from the option fee so you can protect your budget and write a competitive offer. Let’s dive in.
What earnest money is in Texas
Earnest money is a good-faith deposit you make after your offer is accepted. It shows the seller you are serious and gives them confidence to take the property off the market while the contract is active. If the sale closes, your earnest money is credited toward your closing costs or down payment.
Texas purchase contracts spell out the amount, who holds the funds, and when you must deposit them. Most resale deals use TREC forms that include these details, along with any option period you negotiate.
How it fits your contract
Your contract controls what happens to the deposit. If you close, the funds apply to your costs at settlement. If you terminate within your contractual rights and timelines, the deposit is typically returned to you. If you default outside those rights, the seller may keep the earnest money as liquidated damages, depending on the contract.
Who holds the funds in Round Rock
In Central Texas, a neutral title company or escrow attorney commonly holds the deposit in an escrow account. The contract names the escrow holder, how much you will deposit, and the deadline. Always get a written receipt once your funds are delivered.
Typical amounts in Round Rock
Local custom in the Austin–Round Rock area often lands around 1% of the purchase price as a baseline, especially near the median price point. For example, on a $400,000 home, a 1% deposit would be $4,000.
In calmer or more buyer-friendly moments, lower-priced homes may see deposits between $1,000 and $3,000. In multiple-offer situations or on higher-priced properties, buyers sometimes use 2% to 3% or more to strengthen an offer. Amounts of $10,000 to $20,000 are not unusual on higher-value homes.
What sellers see as strong
A larger earnest deposit can signal commitment, which may help in competitive scenarios. Balance that against your risk tolerance, because bigger deposits raise the stakes if you miss a deadline or lose a termination right.
Deposit timing and receipts
It is common to deposit earnest money within 1 to 3 business days after the contract becomes effective. Confirm the exact deadline in your contract, deliver funds promptly, and get a written receipt from the escrow holder.
When earnest money is refundable
Earnest money is refundable when the contract gives you the right to terminate and requires the escrow holder to return it. Deadlines and written notices are critical. Common refund paths include:
- Termination during a valid option period after paying the option fee
- Termination under financing provisions within the contract’s loan approval timelines
- Title issues the seller cannot cure within the contract’s deadlines
- Seller default or other contract breaches by the seller
- A signed mutual release instructing the escrow holder on distribution
Option period termination
If you pay the option fee and terminate in writing within the option period, you have an unconditional right to cancel. In that case, you generally receive your earnest money back. The option fee is typically nonrefundable and compensates the seller for taking the home off the market during that window.
Inspection and financing timelines
Many inspection and repair items must be raised and resolved within specific deadlines. If you have a contractual right to terminate over unresolved issues and you exercise it on time, your earnest money should be returned. If you are financing, you must meet your lender and contract notice timelines to preserve your rights to terminate under financing provisions.
Title issues and seller default
If title defects arise and the seller cannot cure them as the contract allows, you can usually terminate and receive your deposit back. If the seller fails to perform, you may be entitled to recover your earnest money and pursue other remedies stated in the contract.
If there’s a dispute
Escrow holders typically need a signed mutual release to disburse funds when there is disagreement. Without that, the funds may stay in escrow until the parties resolve the dispute through mediation, arbitration, or a court order, consistent with the contract.
Option fee vs. earnest money
These two payments work together but do different jobs.
- Purpose:
- Earnest money shows good faith and performance, held in escrow and credited at closing.
- Option fee pays for your right to terminate during the option period for any reason.
- Recipient:
- Earnest money goes to the escrow holder named in the contract.
- Option fee is paid to the seller (or as directed by the seller’s broker).
- Refundability:
- Earnest money is refundable if you terminate within your contractual rights and timelines.
- The option fee is generally nonrefundable and usually not credited at closing unless negotiated.
Local option period norms
In the Austin area, option periods of 3 to 10 days are common, with 5 to 7 days often used for a full inspection window. In multiple-offer scenarios, some buyers shorten the option period to 2 to 3 days or waive it to compete. Shorter or waived options reduce seller risk but increase buyer risk.
Real-world examples
- Example A: A balanced market. You buy a $400,000 Round Rock home with $4,000 earnest money (1%) and a $200 option fee for a 7-day option period. You complete inspections within 7 days and continue. At closing, your earnest money is credited; the option fee stays with the seller.
- Example B: A competitive offer. On a $500,000 home, you offer $15,000 earnest money (3%), pay a $1,000 option fee, and request a 3-day option period. Your offer signals strong commitment, but you carry more risk if inspections reveal issues after the short option window.
First-time buyer checklist
- Confirm who holds the earnest money and the exact deposit deadline in your contract.
- Decide on a deposit amount that fits your risk tolerance and current Round Rock market conditions.
- Choose an option period length that allows time for inspections and estimates.
- Deliver funds on time and obtain a written receipt from the escrow holder.
- Track inspection and financing deadlines closely, and send written notices if you plan to terminate.
- Keep all receipts and communications.
Protect your deposit with local guidance
Your timelines and terms drive what happens to your deposit. A local, negotiation-first strategy helps you craft the right earnest money and option fee for today’s conditions in Williamson County. If you want step-by-step guidance and a data-backed plan, connect with Jeffrey Brown to align your offer with your goals.
FAQs
Do buyers get both the option fee and earnest money back when canceling during the option period?
- You generally receive your earnest money back, but the option fee is typically nonrefundable and stays with the seller.
Can a seller keep my earnest money if I back out after an inspection?
- If you miss the option deadline or do not follow termination steps in the contract, you could forfeit the deposit. If you terminate on time under contract rights, it should be returned.
Who usually holds earnest money in Round Rock, TX?
- A neutral title company or escrow attorney typically holds the funds. The contract names the escrow holder.
What happens to my earnest money if the seller accepts another offer after signing with me?
- With a valid executed contract, accepting another offer would be a breach by the seller. You may be entitled to your earnest money back and other remedies per the contract.
Does a larger earnest money deposit speed up my loan approval?
- No. Lenders review credit, income, and appraisal. A larger deposit may help your offer’s strength but does not change underwriting timelines.
How fast must I deposit earnest money in Texas?
- Many contracts in Central Texas set a 1 to 3 business day window after the effective date. Check your contract and follow the stated deadline.
