Buying in Plano and wondering how earnest money and the option fee actually work? You are not alone. These two payments do very different jobs in a Texas purchase, and getting them right can help you win the house without taking on unnecessary risk. In this guide, you will learn what each payment does, typical amounts in Collin County, timelines, and smart ways to shape your offer. Let’s dive in.
What each payment does
Earnest money
Earnest money is your good-faith deposit that shows you intend to buy. It is held by an escrow agent and generally applies to your closing funds. If you terminate properly under the contract’s allowed rights, you usually get this money back.
Option fee
The option fee buys your unrestricted right to terminate during the option period you negotiate. It is typically paid to the seller and is generally nonrefundable. This fee gives you time to inspect and decide without risking your earnest money during that period.
How Texas contracts handle both
Most resale transactions use a Texas contract form that treats earnest money and the option fee as separate items. The contract names the escrow agent who will hold your earnest money and sets specific delivery deadlines. Option fees are paid as the contract specifies, commonly to the seller or through escrow for delivery to the seller.
Deadlines matter. Earnest money is often due within 1 to 3 business days after the effective date. Option fees are due as negotiated, often on or before the option period starts. Missing these deadlines can affect your rights or create a breach, so confirm the exact dates in your contract.
Refunds, credits, and who keeps what
- Earnest money: Refunded if you terminate properly under a valid contingency or during the option period. If you default after protections expire, the seller may claim it as damages per the contract. Escrow agents usually need written agreement by both parties or a court order to release disputed funds.
- Option fee: Generally nonrefundable. You and the seller can agree in the contract to credit it to you at closing, but it is commonly kept by the seller as consideration for the option right.
Plano norms and typical amounts
Plano is in Collin County, where amounts vary by price point and competition level. Local practice shifts with market conditions, but common ranges include:
Earnest money:
- Many single-family homes: about $1,000 to $5,000.
- Competitive offers: 1% to 2% of purchase price is common to show strong commitment.
- Higher-priced or hot listings: deposits can rise and may reach up to 5% in some cases.
Option fee and period:
- Typical markets: $100 to $500 for about 5 to 10 days.
- Competitive situations: $1,000 to $3,000 (or more) for a shorter or more persuasive option period. Some buyers waive the option entirely to compete, which increases risk.
Timeline examples you can expect
These are common patterns you might see in Plano. Your contract will control exact terms.
Example A — buyer-friendly/standard:
- Earnest money: $2,000 to title company within 3 days.
- Option: 7 days with a $200 option fee paid to the seller before the period begins.
- Inspections: scheduled within the first 2 to 3 days.
Example B — competitive:
- Earnest money: 1% to 2% of price, delivered as fast as same day or within 1 business day.
- Option: waived or 0 to 3 days (often $0 if no option period).
- Buyer relies on financing and appraisal protections only.
Example C — relocating buyer, longer due diligence:
- Earnest money: $3,000 to $5,000 to show commitment.
- Option: 10 to 14 days with a $500 to $1,000 option fee.
How to size each in a Plano offer
Earnest money
- Normal market: $1,000 to $3,000 for entry to mid-level homes.
- Competitive or higher price: 1% to 2% of purchase price to stand out.
- Use higher earnest money when there are multiple offers or when the seller wants extra assurance.
Option fee and period
- Need time for inspections: 5 to 10 days with a reasonable fee.
- Very competitive: shorten to 2 to 3 days, or waive only if you accept the risk.
- Longer than 10 days: consider $500 to $1,500 to compensate the seller for the extra time.
Risk trade-offs to consider
- Waiving the option period: boosts your offer but removes your unrestricted termination right over inspection concerns. Your earnest money is more exposed after other protections expire.
- Large earnest money with short option period: very strong to sellers, but gives you little room to exit later without risking the deposit.
- Keeping a short option: a 2 to 5 day option can preserve a small inspection window while remaining competitive.
Buyer checklist
- Confirm the escrow agent in the contract and plan for a title company escrow.
- Know your exact delivery deadline for earnest money and have funds ready.
- Decide on option period length and fee based on market conditions and your inspection needs.
- Line up inspectors to start immediately after execution.
- Put in writing if you want the option fee credited at closing.
- Keep receipts and confirmations for both payments.
Seller checklist
- Require earnest money to be held by a reputable title company and set a short deposit deadline.
- Ask for quick proof of deposit in multiple-offer situations.
- Review the full package: price, financing strength, earnest money, option fee, and timelines.
- If you allow a later earnest deposit, document the new date in a written amendment.
Pro tips to stay competitive in Plano
- Deliver earnest money fast and share proof of deposit to signal seriousness.
- Pair strong deposits with a solid pre-approval and flexible closing date.
- Consider a shorter option with a clear inspection plan rather than a full waiver.
- If needed, offer non-price terms like flexible possession or a leaseback to strengthen your position.
Ready to shape a Plano offer that balances confidence and protection? Reach out to the neighborhood experts who handle relocations, move-ups, and investor deals every week. Schedule a free consultation with Cardinal Realty Group and get tailored guidance for your next move.
FAQs
What is the difference between earnest money and an option fee in Texas?
- Earnest money is a refundable escrow deposit applied to closing if you proceed, while the option fee is paid to the seller for a time-limited right to terminate and is generally nonrefundable.
How much earnest money is typical in Plano home purchases?
- Many buyers offer $1,000 to $5,000, while competitive offers often use 1% to 2% of the purchase price to stand out.
Is the option fee refundable in a Plano purchase?
- No, option fees are generally nonrefundable; you may negotiate for it to be credited at closing, but the seller typically keeps it if you terminate.
When are earnest money and the option fee due in Texas?
- Earnest money is commonly due within 1 to 3 business days after the effective date, and the option fee is due as negotiated, often when the option period begins.
Who holds earnest money in Collin County transactions?
- A title company or other named escrow agent holds earnest money; the contract specifies who that escrow agent is.
Can I waive the option period to win a multiple-offer in Plano?
- Yes, some buyers waive it to compete, but that increases risk because you lose your unrestricted right to terminate over inspection issues.
What happens to earnest money if I terminate during the option period?
- If you terminate properly within the option period, you typically receive your earnest money back, while the option fee remains with the seller.
What if I miss the earnest money deadline in my Texas contract?
- Late delivery can be a breach that gives the seller remedies, including possible termination, so confirm deadlines and deliver on time.
