Making an offer in Johnson County? Two small checks can make or break your deal. If “earnest money” and “option fee” feel confusing, you are not alone. Understanding how each one works helps you protect your budget, stay in control of inspections, and write a stronger offer. In this guide, you will learn what each payment is for, typical local amounts, key timelines, and smart strategies for Johnson County homes and land. Let’s dive in.
Earnest money vs. option fee basics
Earnest money in Texas
- Earnest money is a deposit that shows good faith to the seller and is applied to your purchase price at closing if the sale completes.
- It is typically held in escrow by the title company named in your contract.
- Refundability depends on your contract rights. If you terminate under a valid contingency within the deadline, you usually get earnest money back. If you default outside your rights, the seller may keep it as liquidated damages per the contract.
Option fee and option period
- The option fee is a separate, negotiated payment that buys you an exclusive right to terminate the contract for any reason during a short option period.
- You pay the option fee as the contract specifies. It often goes to the seller, sometimes handled through the title company.
- If you terminate during the option period, the option fee is typically nonrefundable. Your earnest money is usually returned if you followed the contract.
Key differences at a glance
- Purpose: Earnest money shows commitment. The option fee buys your right to walk away during a set period.
- Where funds go: Earnest money is escrowed with the title company. The option fee is paid to the seller or processed through escrow per contract terms.
- Refundability: Earnest money may be refundable if you use your contractual rights correctly. The option fee is usually nonrefundable.
- At closing: Earnest money is credited to you. The option fee generally stays with the seller unless your contract says it will be credited.
Typical amounts in Johnson County
- Option fee: Many resale homes see about 100 to 400 dollars. In multiple-offer situations, buyers sometimes offer more or shorten the option period.
- Earnest money:
- Under 200,000 dollars: about 500 to 2,000 dollars.
- 200,000 to 400,000 dollars: about 2,000 to 5,000 dollars.
- Higher-priced homes and land: often 1 to 2 percent of the price.
These ranges reflect local practice in areas like Cleburne, Burleson, Joshua, Alvarado, Venus, and Rio Vista. Your final amounts should match the property, competition level, and your comfort with risk.
Timelines and deadlines to track
- Option period length: Negotiated in days, often 3 to 10. It begins as the contract states and ends exactly at the specified time.
- Earnest money delivery: Your contract sets a delivery deadline after the effective date. Late delivery can be a breach.
- Financing and appraisal: Separate timelines in your contract can affect whether earnest money is refundable.
- Notices: Follow the contract’s delivery rules for termination and other notices. Keep proof of delivery.
Ask your agent to calendar every deadline and confirm them in writing so nothing slips.
How these protect you
- Earnest money boosts your offer’s credibility and can help you compete.
- The option period gives you a short window to complete inspections and, if needed, terminate without default. This protects your earnest money if you act within the deadline.
If you miss a deadline or waive a contingency, your earnest money can be at risk. The option fee is usually a sunk cost in exchange for this protection.
Negotiation strategies for Johnson County
Strong-offer approach
- Larger earnest money and a shorter option period can stand out in multiple-offer situations.
- A higher option fee can signal you are serious while keeping limited inspection rights.
- Trade-off: More money at risk if you find issues or need more time.
Conservative approach
- Keep a reasonable option period, such as 5 to 10 days, with a modest option fee so you can complete inspections.
- Match earnest money to price and market tempo, and be sure your financing and inspection protections are clear.
Balanced approach
- Offer competitive earnest money, a shorter option period of 3 to 5 days, and a modest option fee to balance risk and competitiveness.
First-time vs. move-up buyers
- First-time buyers: Preserve the option period. Avoid waiving it unless you are comfortable with risk and timing.
- Move-up buyers: You may tighten timelines or increase earnest money if you have reserves and experience with inspections.
Johnson County due diligence to consider
- Septic and well: On rural acreage, plan septic inspections and well-water testing. Book immediately after acceptance to meet the option deadline.
- Foundation: Clay soils are common in North Texas. Consider a foundation or structural evaluation if there are signs of movement.
- Termites and pests: Order a termite inspection or review the seller’s treatment history.
- Survey and boundaries: Request an existing survey or allow time for a new one, especially on acreage or recent lot splits.
- HOA and deed restrictions: Allow time to review documents before your option period ends.
Buyer checklist for offers
- Confirm the escrow holder, earnest money amount, and delivery deadline in the contract.
- Set an option period long enough to complete inspections and any septic/well testing or survey work.
- Decide how much option fee you can afford to lose if you terminate.
- Pre-schedule inspectors so you can start within 24 to 48 hours of acceptance.
- Track all timelines and keep proof of delivery for notices and amendments.
- Verify how funds are handled at closing, including any crediting of the option fee noted in the contract.
Putting it all together
When you know the role of earnest money and the option fee, you can tailor your offer to the property and the market. In Johnson County, small changes to the amount, option length, and timing can help you win the home while protecting your budget. If you want help setting the right strategy for your next offer, connect with Michelle Martin for local, family-first guidance.
FAQs
What is earnest money in a Texas home purchase?
- It is a good-faith deposit held in escrow and credited to you at closing. Refundability depends on using your contract rights and deadlines correctly.
What is the option fee and option period in Texas?
- It is a separate payment that buys you the right to terminate for any reason during a short period. The fee is usually nonrefundable even if you terminate.
Which am I more likely to lose, earnest money or the option fee?
- The option fee is usually nonrefundable. Earnest money can be refunded if you terminate under your contract rights within the deadlines.
Can the option fee be credited at closing?
- Only if your contract says so. Many contracts treat the option fee as seller compensation, but it is negotiable.
Who holds earnest money in Johnson County?
- The contract names the escrow holder, commonly a title company. In some cases a listing broker may hold funds if permitted.
How fast should I schedule inspections in Johnson County?
- Immediately after the contract is executed. Inspectors can book out a few days, so quick scheduling helps you meet the option deadline.
