Making an offer on a home in Lubbock? You will hear a lot about earnest money, and it can be confusing the first time around. You want to show sellers you are serious without putting more at risk than you need to. In this guide, you will learn how much to budget, when deposits are refundable, and how earnest money interacts with Texas option periods and financing timelines. Let’s dive in.
Earnest money basics in Texas
Earnest money is a good‑faith deposit you include with your offer. It shows the seller you intend to close and it is usually credited to your cash to close at settlement. If your contract ends under a valid contingency, the deposit can be returned to you.
It helps both sides. The seller gains some security that you plan to perform. You gain protection because Texas contracts can include termination rights that allow you to recover your deposit if you act within the deadlines.
Typical amounts in Lubbock
Across Texas, a common rule of thumb is 1% to 2% of the purchase price. In Lubbock, many entry and mid‑market offers use flat deposits in the $1,000 to $3,000 range for typical single‑family resales. For higher‑priced homes or multiple‑offer situations, buyers often increase the deposit to stand out.
A few quick examples:
- $150,000 purchase price → about $1,500 earnest money, or sometimes a flat $1,000.
- $300,000 purchase price → about $3,000 earnest money.
- $500,000 purchase price → about $5,000 to $10,000 earnest money.
Local norms can shift with inventory and competition in areas like Tech Terrace, Lakeridge, or Quaker Heights. Ask your Lubbock agent what is competitive right now so you balance strength with protection.
Option period vs earnest money
In Texas, the option fee and earnest money are separate. This is a common point of confusion.
- Option fee: A negotiated, typically nonrefundable payment to the seller that buys you an unrestricted right to terminate during the option period. Many Texas offers use $100 to $300 as a starting point, but amounts vary.
- Option period: A negotiated number of days after the effective date where you can walk away for any reason. If you terminate during this window, you usually recover your earnest money, but the seller keeps the option fee.
- Earnest money: Held in escrow. It is refundable only if the contract gives you a right to terminate and you act on time.
Quick example: You pay a $250 option fee and $3,000 earnest money. You inspect the home and terminate within the option period. The seller keeps the $250, and your $3,000 should be returned under the contract.
How the deposit is held
Your contract names the escrow agent who will hold the funds. In Lubbock, that is usually a title company. Escrow holders must follow the contract and applicable rules when receiving, holding, and releasing funds.
How you will deliver funds is set in the contract. Common methods include personal check, cashier’s check, or wire to the title company. Always confirm wiring instructions by calling a known number for the title company. Do not rely on email alone.
Pro tips:
- Confirm the exact payee, delivery window, and address before sending funds.
- Get a receipt showing the escrow deposit and keep it with your records.
- Save your escrow officer’s name, phone, and file number for quick reference.
Refunds, contingencies, and timelines
Whether your deposit is refundable depends on the contract and timing. The Texas TREC contract and addenda outline your rights and deadlines.
Situations where earnest money is often refundable:
- You terminate within the option period after paying the option fee and giving proper notice.
- You terminate under the financing contingency in the Third Party Financing Addendum within the stated deadlines.
- You object to title issues that are not cured within the contract’s cure period and you have a right to terminate.
Situations where your deposit may be at risk:
- You miss a deadline for termination in the option period or financing addendum.
- You default on the contract without a termination right. If the contract provides for liquidated damages, the seller may keep the earnest money.
- There is a dispute and no mutual release is signed. The escrow agent may hold funds until there is an agreement or a court order.
Financing contingency and timing
If you are using a loan, the financing contingency is key. The contract sets dates for loan application, approval, and notices. If your loan is denied and you timely terminate as allowed by the contract, your earnest money is typically refundable. Missing a notice or deadline can put your deposit at risk.
What helps:
- Apply for financing immediately and respond quickly to lender requests.
- Track all contingency deadlines on a calendar.
- Send notices in writing as the contract requires and keep copies.
Make your offer strong and safe
You can make a compelling offer without taking on unnecessary risk.
- Calibrate your earnest money to current Lubbock conditions. Strong but not excessive.
- Set a focused option period and budget time for inspections.
- Pair a competitive EMD with strong financing terms and a clear preapproval.
- If exposure worries you, consider other negotiable terms like closing date or repair strategies instead of only raising your deposit.
Step‑by‑step earnest money timeline
- Get preapproved and set your earnest money budget before shopping.
- Write the offer with both earnest money and option fee amounts.
- After acceptance, deliver the option fee to the seller and earnest money to the escrow agent by the contract deadline.
- Schedule inspections and negotiate repairs within the option period.
- Monitor financing and title timelines. Send any required notices before deadlines.
- Close on time. Your earnest money is credited toward your cash to close.
Local budgeting tips for buyers
- Set aside two separate buckets: one for earnest money and one for the option fee.
- Keep a small cushion in case you choose a larger EMD in a competitive situation.
- Store receipts and email confirmations for all payments and notices.
- If you need flexibility, ask your agent about deposit size, option length, and contract terms that protect you.
Work with a local guide
Earnest money in Lubbock is straightforward once you know the rules, but timing and details matter. You want the right deposit size for the neighborhood, price point, and competition, plus a financing plan that keeps your timelines on track. If you prefer one team for both the offer strategy and the loan, reach out to Freddie Marmolejo for local guidance and an integrated financing review.
FAQs
What is earnest money in Lubbock home purchases?
- It is a good‑faith deposit held in escrow to show you intend to buy, usually credited to your cash to close or returned if you terminate under a valid contract right.
How much earnest money should I budget in Lubbock?
- Many buyers set aside 1% to 2% of price or a flat $1,000 to $3,000 for typical resales, adjusting higher for competitive or higher‑priced homes.
Is earnest money refundable under Texas contracts?
- Yes, if you terminate within your contract rights and deadlines, such as the option period, financing contingency, or certain title objection rights.
What is the difference between earnest money and the option fee?
- Earnest money goes to escrow and can be refundable under the contract, while the option fee is paid to the seller for an unrestricted termination right and is typically nonrefundable.
Who holds the earnest money in Lubbock transactions?
- A named escrow agent, commonly a title company, holds the funds and releases them only as allowed by the contract.
What happens if my loan is denied in Texas?
- If you have a financing contingency and you give timely notice as the contract requires, your earnest money is typically refundable.
How do I deliver earnest money safely to the title company?
- Use the method specified in the contract, verify wiring instructions by phone with the title company, and obtain a receipt once funds are deposited.
