How does earnest money work in Texas?

Earnest money is the money you deliver to the title company within 3 days after the effective date of your contract. The title company holds it, and at closing it is credited toward what you have to pay.

Once the seller accepts your offer, the first thing the contract asks of you is to deliver that money, and it is normal to have questions at that moment: who do I give it to, and what happens if the purchase does not go forward? If you are buying a home in Tomball or anywhere in Texas, this explains how it works, in the order it happens.

What this article answers

• What is earnest money?
• Is earnest money the same as the down payment?
• Is earnest money required in Texas?
• When do you deliver earnest money in Texas?
• Do you get your earnest money back if you terminate the contract?

The short answer

• You deliver the earnest money to the title company named in the contract within 3 days after the effective date.
• If the third day falls on a Saturday, Sunday, or one of the holidays the contract names, you have until the end of the next day that is not one of those days.
• If you terminate the contract on time, using one of the ways out the contract gives you, the title company returns your earnest money.

What is earnest money?

It is a good-faith deposit, the money you deliver after signing the purchase contract and that the title company holds until closing.

You and your agent propose the amount in your offer, and that amount is set once the seller accepts it and both of you sign the contract.

Is earnest money the same as the down payment?

No, they are two different payments, although at closing the title company uses your earnest money to pay part of your down payment and closing costs.

The title company applies it first to your down payment and then to your closing costs, and if anything is left over, it returns it to you. That is why the cash to close the title company asks you for already has that money subtracted. My article on the difference between cash to close and closing costs walks through that math step by step.

Is earnest money required in Texas?

It depends on what the contract says. A purchase contract is valid without earnest money, but if the contract calls for it, you have to deliver it on time.

Even though no law requires it, most sellers ask for it, because earnest money shows the seller that your interest in the home is serious. That is why, in my opinion, it is an essential part of a serious offer if you want the seller to really consider it.

The contract binds you and the seller from the effective date, even if you have not delivered the earnest money yet, so if you do not deliver it, the contract stays in effect.

When do you deliver earnest money in Texas?

You deliver it to the title company named in the contract within 3 days after the effective date.

The effective date is the day the last party to sign, you or the seller, notifies the other that they signed. Day 1 is the day after that date, and you count calendar days, including weekends and holidays.

The earnest money deadline has one special rule. If the third day falls on a Saturday, Sunday, or legal holiday, you have until the end of the next day that is not one. The holidays that count are the eleven named in the Texas law the contract refers to: New Year’s Day, Martin Luther King Jr. Day, Presidents’ Day, Memorial Day, June 19 (Emancipation Day), July 4, Labor Day, Veterans Day, Thanksgiving, the Friday after Thanksgiving, and Christmas Day. Columbus Day, the second Monday in October, is not on that list.

For example, if your contract’s effective date is Monday, November 23, 2026, the third day is Thursday, November 26, which is Thanksgiving. Friday the 27th is also a holiday, and then come Saturday and Sunday, so you have until Monday, November 30 to deliver your earnest money to the title company.

The contract does not set a time of day for that delivery, and it lets you deliver the earnest money and the option fee together in a single payment, which is how it is often done. Since many title companies close between 5:00 and 5:30 p.m., I recommend delivering that payment before then on the last day.

Do you get your earnest money back if you terminate the contract?

It depends on how the contract ends. In many cases the title company returns it to you, and in others the seller may keep it.

You get it back when you terminate the contract on time, using one of the ways out the contract gives you. For example, when you give the seller written notice that you are terminating during the option period, before 5:00 p.m. on its last day, local time where the home is located, or when your lender does not approve your loan and you terminate within the days set in the financing addendum. You also get it back when the seller cannot fix a title problem within the time the contract gives, or when the seller is the one who does not comply with the contract.

The seller may keep the earnest money when you terminate without one of those ways out, for example if you change your mind after the option period ends, or if you let the financing addendum deadline pass without terminating and then cannot buy.

When the contract ends without closing, the title company may ask you and the seller to sign a release of earnest money before it delivers the money. With that signature, both of you are free, the seller can sell the home again, and you can keep looking for yours. If one of you does not sign, the other can make a written demand for the money to the title company, and if no one objects in writing within the next 15 days, the title company may deliver it.

What happens if the earnest money is delivered late?

If you do not deliver the earnest money to the title company on time, the contract allows the seller to terminate it or exercise the seller’s remedies, as long as the seller gives you notice before you deliver it.

From real life

In some transactions, when everything seems to be going great, after an exhaustive negotiation and after getting great news from the appraisal, because it came in $20,000 higher than we expected, things like this happen. The lender’s underwriter set a condition for the loan that no one expected. It turned out that, according to the underwriter, the first earnest money payment had been made from an account they could not verify, because that money came from a loan my clients had taken out, so the underwriter required the earnest money to be delivered to the title company again, from a different source.

A relative of my clients gave them that money as a gift and delivered a second earnest money payment to the title company, which replaced the first one. We signed an amendment with the seller so that the purchase showed only one earnest money deposit, and after closing, the title company returned my clients’ first payment. Things that happen in real life.

Knowing where your earnest money is and when you get it back takes a lot of weight off the first week of your contract and lets you make the decisions of those days calmly. My work with buyers is explained here, and if the home you like already has another contract, my article on what a backup offer is explains how earnest money works while you wait.

If you need help preparing your offer and deciding the details of your contract, like how much earnest money to offer, you can write to me. I will be happy to help you and to be your Realtor.

Lliliam Foster is a bilingual REALTOR® with Compass serving Spring, The Woodlands, Conroe, Magnolia, Tomball, Cypress, Humble/Atascocita, North Houston/Aldine and the FM 1960 corridor. Information current as of October 2026.

Lliliam Foster, REALTOR® — Compass. This information is general in nature and does not constitute legal or financial advice. Compass is a real estate brokerage licensed in Texas.