Making an offer on a Brentwood home can move fast, and two small checks can shape your entire contract: the earnest money and the option fee. If you are new to Austin or have not bought in Texas before, the rules may feel confusing. In a few minutes, you will understand what each payment does, how to protect your funds, and how to use them to strengthen your offer in Brentwood. Let’s dive in.
What each fee means in Texas
Earnest money: your good‑faith deposit
Earnest money is a deposit that shows the seller you are serious. You deliver it to the escrow agent named in your contract, usually a title company. If you close, it is credited toward your purchase. If you default, the seller may claim it as liquidated damages if your contract allows.
Option fee and option period: your right to walk away
The option fee is a separate payment you make to the seller for the right to terminate the contract within an agreed option period. During this period, you can cancel for any reason and stay in compliance with the contract. If you close, the option fee is typically credited at closing. If you terminate during the option period, the seller usually keeps the option fee.
How they work together
Think of them as two tools with different jobs. Earnest money secures your contract and goes to the title company. The option fee buys you time to inspect and decide, and it goes to the seller. If you cancel within the option period, you usually get your earnest money back, while the seller keeps the option fee.
Who holds the money and when
Where funds go
- Earnest money is held by the escrow agent listed in your contract, commonly a title company in Travis County.
- The option fee is commonly paid directly to the seller or delivered to the seller’s agent. Local practice varies, so follow the instructions in your contract.
Delivery timelines
Your contract sets the delivery deadlines. In Texas, many contracts require earnest money to be delivered within a short window after the effective date, often 1 to 3 business days. Sellers often expect the option fee at contract execution or within the same short window. Always confirm the exact days listed in your signed contract.
Receipts and documentation
Get written confirmation for both payments. Ask the title company for a receipt for earnest money and request a written receipt from the seller or listing agent for the option fee. Keep proof of delivery, such as a wire confirmation or a check copy.
Typical amounts in Brentwood
Option fee ranges
In Texas, option fees often range from about $100 to $1,000. In many Austin neighborhoods, including Brentwood, a short option period of 5 to 7 days often pairs with an option fee in the $100 to $500 range. If you want a longer option period or the market is very competitive, you may offer more.
Earnest money benchmarks
A common benchmark in metro areas is about 1 percent of the purchase price for earnest money. In competitive pockets like Brentwood, sellers sometimes expect higher earnest money, such as 1 to 3 percent. There is no fixed rule. Choose an amount that signals commitment without creating unnecessary risk for you.
Matching terms to the market
- Hot seller’s market: buyers may increase earnest money, shorten the option period, or raise the option fee for stronger terms.
- Balanced market: buyers may keep a standard option period and a modest option fee while using a typical earnest money amount.
How refunds and forfeits work
If you terminate during the option period
- Seller typically keeps the option fee.
- Your earnest money is usually refundable, subject to the contract’s release instructions.
If you proceed to closing
- Both the earnest money and option fee are normally credited to you at closing based on the contract.
If you default after the option period
- If you cancel without a valid contractual right after the option period ends, the seller may be entitled to your earnest money as liquidated damages if the contract allows. The escrow agent often requires a signed release by both parties or a legal resolution before disbursing funds.
Brentwood offer playbook
Buyer strategies for older or renovated homes
Brentwood has a mix of midcentury homes and renovations. Inspections during the option period can be crucial. Keep your option period if you want the flexibility to walk away based on inspection results. Pair it with an option fee you can accept losing if you terminate.
- Aim for a short, focused option period of about 5 to 10 days for inspections.
- Choose an option fee that balances competitiveness with your risk tolerance, often $100 to $500 for shorter periods.
- Use earnest money to show seriousness, often around 1 percent, and consider higher only if the offer situation calls for it.
- Confirm in the contract that the option fee will be credited at closing if you proceed.
Seller perspective in multiple offers
When comparing offers, sellers in Brentwood look beyond price. Strong earnest money, a shorter option period, and a clear plan to meet deadlines can make a buyer stand out. Ask for a receipt for the option fee and ensure the contract names who receives it. Review overall terms, including financing and timelines, not just the deposits.
Risk management for both sides
- Buyers: if you consider shortening or waiving the option period, review disclosures early and do a thorough walkthrough. Budget for potential repairs.
- Sellers: do not rely only on keeping earnest money in the event of a breach. Keep clear records and consult your broker for next steps if issues arise.
Real world examples
- Buyer terminates during option period:
- Price: $700,000
- Earnest money: $7,000
- Option fee: $300 for 7 days
- Outcome: You terminate on day 6 due to inspection concerns. The seller keeps the $300 option fee. Your $7,000 earnest money is returned per the contract.
- Buyer proceeds to closing:
- Same numbers as above
- Outcome: At closing, both the earnest money and option fee are credited to your purchase.
- Buyer defaults after option period:
- No remaining termination rights
- Outcome: The seller may claim the earnest money as liquidated damages if the contract allows. The escrow agent will likely require a signed release or legal direction to release funds.
- Competitive Brentwood bungalow with multiple offers:
- Buyers who offer higher earnest money, shorten the option period, or offer a larger option fee often stand out. Weigh that strategy against the risk of fewer exit options after inspections.
Quick checklist: day 1 to day 7
- Confirm deadlines in your signed contract for both payments and the option period end date.
- Wire earnest money to the title company or deliver a cashier’s check per instructions. Get a receipt.
- Pay the option fee to the seller or their agent as directed. Get a written receipt.
- Schedule general inspection, foundation assessment, roof evaluation, and any specialty inspections you need.
- Review inspection reports promptly. Request credits or repairs, or prepare to terminate within the option window if needed.
- Track all dates. If you plan to terminate, deliver notice in writing before the option period expires.
Common mistakes to avoid
- Missing the earnest money or option fee delivery deadline set in your contract.
- Assuming funds are refundable without following the contract’s termination process.
- Paying the option fee without getting a receipt from the seller or listing agent.
- Overcommitting on earnest money in a way that increases your exposure if you default.
Work with a local guide
Your offer terms should fit the property, the seller’s priorities, and the Brentwood market on the day you write. A clear plan for earnest money, option fee, inspections, and timing helps you compete with confidence. If you want a hands-on approach that balances protection with a strong offer, connect with Liz King to map out your strategy.
FAQs
What is the difference between earnest money and the option fee in Texas?
- Earnest money is a good faith deposit held by the escrow agent and applied at closing. The option fee is paid to the seller for the right to terminate during a set option period and is typically nonrefundable if you cancel.
Who holds earnest money and the option fee in an Austin purchase?
- Earnest money is held by the title company or named escrow agent. The option fee is commonly paid to the seller or delivered to the seller’s agent, with a receipt.
When are earnest money and the option fee due after offer acceptance?
- Your contract controls the deadlines. Many Texas contracts require earnest money within 1 to 3 business days and the option fee at execution or within a similar short window.
What happens to my money if I terminate during the option period?
- The seller typically keeps the option fee. Your earnest money is usually refunded, subject to the contract’s release instructions.
How much should I offer for earnest money and the option fee in Brentwood?
- Many buyers use around 1 percent of the price for earnest money and $100 to $500 for a short option period. Adjust based on competition and your risk tolerance.
Can the seller keep my earnest money if I back out after the option period?
- If you terminate without a valid contractual right after the option period ends, the seller may be entitled to the earnest money as liquidated damages if the contract allows.
