If you’re buying or selling a house in Texas, you’ve probably heard the term “earnest money” and wondered what it actually means, how much it should be, and what happens to it if the deal falls apart. Earnest money is a good-faith deposit that shows a buyer is serious about the purchase, and how it’s handled can make a real difference in how smoothly your closing goes. Here’s what Texas home sellers need to know.
What Earnest Money Actually Is
Earnest money is a deposit a buyer puts down shortly after a contract is signed to show they’re serious about following through on the purchase. It’s held by a neutral third party, usually a title company, and applied toward the buyer’s down payment or closing costs at closing. It is not an extra fee on top of the purchase price, it’s simply a portion of the money the buyer is already committing to pay, put down early as a sign of good faith.
How Much Earnest Money Is Typical in Texas
There’s no legally required amount. In most Texas residential deals, earnest money runs between 1% of the purchase price on the lower end and closer to 2-3% on higher-priced or more competitive listings. On a $250,000 house, that typically means somewhere between $2,500 and $5,000, though the exact figure is negotiated between buyer and seller and written into the contract. A larger deposit can signal a stronger, more committed offer, which is one reason sellers sometimes favor it when comparing multiple offers.
When Earnest Money Is Due
The standard Texas contract requires the buyer to deliver earnest money to the title company within three days of the contract’s effective date. Missing that deadline doesn’t automatically kill the contract, but it can give the seller grounds to terminate if the buyer never comes through. As the seller, it’s worth confirming with your title company that the deposit actually cleared before you start treating the deal as solid and taking your house off the market elsewhere.
What Happens If the Buyer Backs Out
This is where earnest money matters most to sellers. If the buyer backs out for a reason covered by one of their contract contingencies, financing falling through, an inspection turning up problems, an appraisal coming in low, they can usually walk away and get their deposit back. But if the buyer backs out for a reason not covered by the contract, or simply lets a contingency deadline pass without acting, the earnest money is typically released to the seller as compensation for the time the house was off the market. This is exactly why earnest money exists: it gives the buyer a real financial stake in following through.
What Happens If the Seller Backs Out
It works both ways. If the seller fails to perform under the contract, backing out without a valid contractual reason, refusing to close, or breaching another term, the buyer is typically entitled to get their earnest money back, and depending on the contract language, may have grounds to pursue specific performance or other remedies. This is one more reason it pays to work with a buyer who has a track record of actually closing, rather than one who might tie up your house for weeks and then walk.
How It Works Differently With a Direct Cash Sale
When you sell directly to Panda Properties, there’s no financing contingency and no appraisal contingency to worry about, because we’re not borrowing money from a lender to buy your house. That removes two of the most common reasons deals fall through after earnest money has already been put down. We still put down earnest money to show we’re serious, but with far fewer ways for the deal to unravel between contract and closing, which means a lot more certainty for you as the seller.
Selling a house involves a lot of contract details most homeowners only deal with once every several years, and earnest money is just one piece of it. Zachary Faris, who works with Panda Properties, is a licensed Texas real estate agent (TREC #0691730), sponsored by Myers Home Buyers LLC (TREC #9005311), and can walk you through exactly how a direct cash offer would work for your specific house, no obligation and no pressure.
Want to know what a fair, all-cash offer on your house looks like? Reach out to Panda Properties today and we’ll walk you through the numbers, no earnest money guesswork required.
Frequently Asked Questions
Will you be listing my home on the MLS or actually buying it?
Great question. Panda Properties buys houses directly for our own account — we’re not listing your home on the MLS as your agent. Zachary Faris, who works with you, is a licensed Texas real estate agent (TREC #0691730), sponsored by Myers Home Buyers LLC (TREC #9005311), but this purchase is a direct sale to us, not a representation of you as a seller. From there, we typically repair the house and resell it or keep it as a rental.
Do you pay fair prices for properties?
Many of the homes we purchase are below market value (we do this so we can resell at a profit to another home owner). We are looking to get a fair discount on a property. However, in our experience, many sellers aren’t necessarily expecting a large “windfall” on the property but rather appreciate that we can offer cash, we close very quickly (no waiting for financing), and no time or effort, or expense is required on your part of fix up the property or pay agent fees. If that’s what you’re looking for and you see the value in getting your house sold fast…let’s see if we can come to a fair win-win price. (Besides, our no-obligation pricing commitment means that you do not have to move forward with the offer we give… but it’s good to know what we’re offering!)
How do you determine the price to offer on my home?
Great question, and we’re an open book: Our process is very straightforward. We look at the location of the property, what repairs are needed, the current condition of the property, and the value of comparable homes sold in the area recently. We take all of that into consideration, along with current local market conditions, and come up with a fair price that works for us and works for you too.
Are there any fees or commissions to work with you?
This is what makes us stand out from the traditional method of selling your house: There are NO fees or commissions when you sell your house to us. We’ll make you an offer, and if it’s a fit then we’ll buy your house (and we’ll often pay for the closing costs too!). No hassle. No fees. We make our money after we pay for repairs on the house (if any) and sell it for a profit (we’re taking all of the risks here on whether we can sell it for a profit or not, once we buy the house from you… the responsibility is ours and you walk away without the burden of the property and its payments… and often with cash in your hand).
How are you different from a real estate agent?
Real estate agents list properties and hope that someone will buy them. The agent shows the properties to prospective buyers if there are any, and then takes a percentage of the sale price if they find a buyer. Sellers who list traditionally often wait weeks or months for the right buyer, financing approvals, and closing — time many homeowners dealing with foreclosure, divorce, or relocation simply don’t have. Oftentimes, the agent’s commission is 3-6% of the sale price of your home (so if it’s a $100,000 home, you’ll pay between $3,000 – $6,000 in commissions to an agent). But that’s where we’re different: rather than listing your home, Panda Properties buys it directly. Zachary Faris, who works with you, is a licensed Texas real estate agent (TREC #0691730), sponsored by Myers Home Buyers LLC (TREC #9005311), but in this transaction we’re the buyer, not your listing agent — we don’t list homes. Since we’re actually the ones buying the home from you, and we pay with all cash…we can make a decision to buy your home within a couple of days (sometimes the same day). Again, we make our living by taking the risk to buy the home with our own cash, repair the home, and market it ourselves to find a buyer (which is the hard part in this market).
Is there any obligation when I submit my info?
There is absolutely zero obligation for you. Once you tell us a bit about your property, we’ll take a look at things, maybe set up a call with you to find out a bit more, and make you an all-cash offer that’s fair for you and fair for us. From there, it’s 100% your decision on whether or not you’d like to sell your home to us… and we won’t hassle you, won’t harass you… it’s 100% your decision and we’ll let you decide what’s right for you.