Buying a home in Lower Valley is exciting, but the money you put down early can feel confusing. How much earnest money do you need? What is the option fee, and when do you get your money back if you cancel? You deserve clear answers before you write an offer.
In this guide, you’ll learn how earnest money and option fees work in Texas, typical amounts you might see in Lower Valley, when funds are refundable, and how to protect your deposit. You’ll also see simple budgeting examples for common price points. Let’s dive in.
Earnest money basics
Earnest money is a buyer’s good-faith deposit that accompanies an accepted contract. It shows the seller you are committed to the purchase. At closing, it is applied to your purchase price, such as your down payment or closing costs, unless your contract states otherwise.
In Texas, this deposit is usually placed with a title company or another escrow agent named in the contract. The funds are held in escrow until closing or until the parties agree on how to release them if the contract ends.
Whether earnest money is refundable depends on your contract and contingencies. If you end the contract properly under a valid contingency, you typically get your earnest money back. If you default without a valid contingency, the seller may have the right to keep it, depending on the contract’s remedy options.
Option fee explained
The option fee is separate from earnest money. It is a payment to the seller that buys you an unrestricted right to terminate the contract for a set number of days, known as the option period. You typically use this time to complete inspections and due diligence.
The option fee is generally non-refundable because it compensates the seller for taking the home off the market during your option period. If you close, the fee is usually credited to your purchase price. If you terminate within the option period, the seller typically keeps the option fee while your earnest money is returned.
How Texas contracts handle deposits
Your contract names the escrow holder and sets the timelines for delivering both earnest money and the option fee. Follow those timelines closely. Ask for written proof that the escrow holder received your earnest money.
If you have questions about where the money is held or how it will be released, ask your agent and the title company early. Clear instructions help prevent delays and disputes later.
When earnest money is returned
There are several common situations where buyers can receive earnest money back, provided they follow the contract’s notice rules.
Termination during the option period
- If you properly terminate during the option period, the seller usually keeps the non-refundable option fee. Your earnest money is typically returned.
Financing, title, or appraisal contingencies
- If your contract includes these contingencies and you follow the notice and timing requirements, earnest money is usually returned when you terminate for a covered reason.
Mutual release or disputed funds
- If both sides agree on how to release the funds, you can sign a mutual release and instruct escrow to disburse. If there is a dispute and no agreement, the escrow holder may hold the funds, follow the contract’s dispute steps, or interplead the funds into court.
When you could lose earnest money
If you breach the contract outside any valid contingency or termination right, the seller’s remedies can include keeping your earnest money as liquidated damages or pursuing other remedies. The exact outcome depends on the contract and what the seller elects to do. This is why it is important to meet all deadlines and follow the contract language closely.
Typical amounts in Lower Valley
Local practices vary by market conditions and price point. In El Paso County and Lower Valley, you will often see:
- Earnest money: About 1 percent of the purchase price is a common guide. For many entry to mid-level homes in Lower Valley, a flat amount between 500 and 3,000 dollars is also common. For higher-priced homes or competitive situations, 1 to 2 percent or more may be expected.
- Option fee: Commonly 100 to 500 dollars. Many buyers pay 100 to 250 dollars for a shorter option period, and some offer more to secure extra days or strengthen the offer.
These figures reflect typical practices, not hard rules. Your agent will help you tailor your offer to current neighborhood conditions.
Budget examples for Lower Valley buyers
Use these examples to plan your upfront funds when your offer is accepted. Your actual numbers will depend on the specific home, your offer, and what the seller expects.
Example A: Entry-level home at 120,000 dollars
- Earnest money at 1 percent: 1,200 dollars
- Option fee for a short option period: 150 dollars
- Total to have ready soon after acceptance: about 1,350 dollars
Example B: Mid-range home at 180,000 dollars
- Earnest money at 1 percent: 1,800 dollars
- Option fee: 200 dollars
- Total upfront: about 2,000 dollars
Example C: Higher-priced home at 260,000 dollars
- Earnest money at 1 percent: 2,600 dollars. In a competitive moment, you might see 1.5 to 2 percent requested.
- Option fee: 250 to 350 dollars
- Total upfront: about 2,850 to 2,950 dollars
Some buyers propose a smaller flat earnest money amount, such as 1,000 dollars, paired with other strong terms. Others increase earnest money or shorten the option period in a competitive market. Choose the structure that protects your interests and matches local conditions.
Market conditions matter
Expectations shift with supply and demand. If inventory is high and homes sit longer, sellers may accept lower earnest money and smaller option fees. If inventory is tight and multiple offers are common, sellers may prefer higher earnest money, shorter option periods, or higher option fees.
Before you write, your agent can share recent Lower Valley activity such as days on market and the frequency of competing offers. This context helps you right-size your deposits while staying competitive.
Protect your deposit
Follow these steps to safeguard your money and keep your options open:
- Budget for both payments.
- Keep liquid funds ready for earnest money and the option fee as soon as your offer is accepted.
- Choose the right option period length.
- Typical option periods often range from 3 to 10 days in Texas. First-time buyers often choose 5 to 7 days to allow inspections without a long delay.
- Track contingency deadlines.
- Use calendar reminders and send notices on time. Late notices can put earnest money at risk.
- Confirm the escrow holder and get a receipt.
- Deliver funds only as instructed by the contract and title company. Ask for written confirmation that your deposit was received.
- Weigh negotiation trade-offs.
- A stronger earnest money deposit can help your offer stand out, but it also ties up cash until closing. Do not waive inspection rights without understanding the risk.
- If a dispute arises, act early.
- Involve your agent and the title company right away. If needed, consult an attorney to resolve contested funds.
First-time buyer tips for Lower Valley
If you are buying your first home in Lower Valley, keep your process simple and structured.
- Ask your agent to explain the contract timeline so you know when funds are due and when notices must be sent.
- Line up inspectors before you write an offer so you can schedule quickly during the option period.
- Talk through seller expectations in this neighborhood. Learn whether a flat-dollar earnest money amount or a percentage is more common for the homes you are targeting.
- Keep your lender in the loop on appraisal and financing timelines so your contingency protections stay intact.
How a local agent helps
A local, education-focused agent makes this part of the process clear and low stress. You get guidance on the right mix of earnest money, option fee, and option period length for your price point and for today’s Lower Valley market. You also get help coordinating with the title company, tracking deadlines, and sending proper notices so your deposit stays protected.
If you have questions about how much to offer, how to structure your option period, or how to time inspections and financing, reach out to a local pro who puts your interests first. When you are ready to talk through your plan, connect with Celeste Aguilar for clear guidance and step-by-step support.
FAQs
Is my option fee refundable in Texas?
- The option fee is generally non-refundable. It pays for your unrestricted right to terminate during the option period. If you close, it is usually credited to your purchase price.
If I cancel during the option period in Lower Valley, what happens to my earnest money?
- If you properly terminate within the option period, your earnest money is typically returned to you. The seller usually keeps the non-refundable option fee.
How should I pay earnest money safely in El Paso?
- Follow the title company’s instructions. Many escrow holders prefer certified funds or a wire. Confirm instructions directly, and get a written receipt when funds are delivered.
What happens to earnest money if the appraisal is low?
- If your contract allows you to terminate for appraisal or financing issues and you follow the required notice steps, your earnest money is typically returned. Missing deadlines can put it at risk.
The title company cannot locate my deposit. What should I do?
- Contact your agent and the title company immediately for an accounting. Most issues are resolved with records and receipts. If problems persist, consult an attorney and follow the contract’s dispute steps.
