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Earnest Money & Option Fee Explained

Delivery of Earnest Money & Option Money

The Buyer must deliver both earnest money and option money within 3 calendar days of the executed contract. These funds are combined into one check (Example: $2800 in earnest, $200 in option fee = $3,000 check) made payable to the title company. Delivery options include:

  • Hand delivery to title company by the Buyer

  • Wire transfer directly to the title company

  • Delivery by the Realtor to the title company on behalf of the Buyer

  • Overnight delivery (FedEx/UPS) using a shipping label provided by the title company

  • Some Title companies utilize an online app called ZOCAAM which is just like making a mobile check deposit.

Option Fee

The Option Fee grants the Buyer the right to terminate the contract or negotiate repairs during the Option Period. Both the fee and the length of the period are specified in Paragraph 5 of the TREC 1-4 Family Residential Contract.

Important Notes:

  • The Option Fee is non-refundable.

  • If the Option Fee is not delivered to the title company within 3 days of the executed contract, the Buyer forfeits the right to the Option Period. Weekends and holidays still count as option days. If the final day to deliver falls on a weekend or holiday, the deadline is automatically extended to 5:00 PM on the next business day.

  • The Option Period ends at 5:00 PM on the final day, and all negotiations must be completed and signed before that deadline or utilize an amendment to have the option period extended to allow more time.

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Earnest Money

Earnest Money is the Buyer’s good faith deposit made to the Seller to demonstrate commitment to the contract.

Important Notes:

  • Earnest Money may be refundable if a contingency remains in place (e.g., Option, Title, Third-Party Financing, HOA). Buyers should be aware of the potential “outs” available to retain their earnest money.

  • If Earnest Money is not delivered to the title company by 5:00 PM on the 3rd day after execution, the Buyer is considered in default of the contract. Weekends and holidays still count as delivery days. If the final day to deliver falls on a weekend or holiday, the deadline is automatically extended to 5:00 PM on the next business day.

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Disputes Over Earnest Money

If the Buyer and Seller cannot agree on the release of Earnest Money, the Buyer must send a written request to the title company. The other party then has 15 days to respond. If both parties make conflicting claims, the matter must be resolved through mediation or legal proceedings.

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