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Earnest Money in Texas: The 1% Deposit, the 3-Day Deadline, and Where It Sits
Earnest money in Texas is not set by statute, but the market has clear customs: buyers typically deposit 1% to 3% of the purchase price, with 1% the most common starting point, and the funds are due to the escrow holder within three days of the contract's effective date under the standard TREC residential contract. On a $300,000 home that is about $3,000 at 1%. Here is how the deposit works, where it actually sits, and what happens to it if the deal falls apart.
Earnest money in Texas is not set by statute, but the market has clear customs: buyers typically deposit 1% to 3% of the purchase price, with 1% the most common starting point, and the funds are due to the escrow holder within three days of the contract's effective date under the standard TREC residential contract. On a $300,000 home that is about $3,000 at 1%. Here is how the deposit works, where it actually sits, and what happens to it if the deal falls apart.
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The customary number, by purchase price
Title company and REALTOR guides put the normal Texas earnest money deposit at 1% to 3% of the purchase price, with 1% the most common in balanced markets and 2% to 3% showing up when multiple offers are expected. At 1%, that is about $3,000 on a $300,000 home, $4,500 on $450,000, and about $5,000 to $15,000 at 1% to 3% on a $500,000 purchase. The exact amount is negotiated and written into the contract, not imposed by law, so the right number is the smallest one that communicates you are a serious, ready buyer.
- A 1% deposit is standard in most of the San Antonio area right now.
- Offer more than 1% only when the listing is drawing multiple offers and the seller asks for stronger terms.
- Keep the deposit modest enough that your remaining cash covers option fees, inspections, appraisal, and closing costs.
The 3-day clock and where the money sits
Under the TREC One to Four Family Residential Contract, the earnest money is due to the escrow holder, almost always the title company, within three days of the contract's effective date. It does not go to the seller, it earns credit against your purchase price at closing, and the title company documents the deposit so both sides know exactly where it stands. Wiring on day one is the safest habit: it avoids the missed-deadline disputes that slow contracts down.
What happens if the deal falls through
The outcome depends entirely on why the contract ends. If you terminate properly during the option period or under a contingency like financing, inspection, or appraisal, the earnest money is refunded in full. If you default without any right to terminate, the seller may keep the deposit as liquidated damages, and the standard Texas contract caps that at 3% of the purchase price, so the deposit is also your ceiling on that risk. The practical lesson: never let the earnest money decision outpace the contract language, and never skip the option period to save a few hundred dollars.
The deposit is not the risk; the contingencies you negotiate around it are.
The honest amount to offer
In a market where most homes sell near list and 1% is normal, a bigger deposit mostly signals certainty, not buying power. A clean pre-approval and a short option period usually do more for a seller than an extra half-point of earnest money. I will tell you when a larger deposit genuinely changes the outcome, and it is usually only in a genuine multiple-offer situation.
Written by Phyllis Domingo
REALTOR® · TX License 745926 · 100+ homes sold · Helping families move well in San Antonio and the Hill Country since long before the hard part became normal.
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