What is an earnest money contract?

If you’re buying or selling a home in Texas, you’ll hear the term earnest money contract early and often. It’s the Texas nickname for the purchase agreement — the document that turns “we have a deal” into a binding contract. Here’s what it is, and how the earnest money itself works.

In plain terms: in Texas the standard purchase agreement is the TREC One to Four Family Residential Contract — “earnest money contract” is just the everyday name for it.

What is earnest money?

Earnest money is a good-faith deposit the buyer puts down to show they’re serious. It’s commonly around 1% of the purchase price (negotiable), and it’s delivered to the title company — not the seller — within three days of the contract’s effective date. The title company holds it in escrow, and at closing it’s credited toward your down payment and closing costs.

Do you get your earnest money back?

It depends on why the contract ends. The Texas contract has built-in protections that let a buyer terminate and recover earnest money within certain windows:

• The option period — a short, paid window when the buyer can terminate for any reason. See how the Texas option period works.
• The financing contingency — if the buyer can’t obtain loan approval in time. See financing contingencies explained.
• Title and other contingencies — if specific conditions in the contract aren’t met.

If a buyer walks away outside those protections, the seller may be entitled to keep the earnest money — which is exactly why the contract’s deadlines matter so much.

Earnest money vs. the option fee

These get mixed up constantly. The option fee is a separate, usually smaller payment that buys your right to terminate during the option period. Earnest money is the larger deposit that’s credited back to you at closing. Two different things, same contract.

Why it matters

The earnest money contract sets every deadline that protects your money — and missing one can be costly. Part of my job is tracking those dates so your earnest money stays protected. You can review the official forms at the Texas Real Estate Commission, and find more on the buyer FAQ.

Last updated: June 2026 · Reflects the current TREC residential contract.