Trying to make sense of earnest money and the option fee on a Frisco home? You are not alone. These two payments work together, but they serve very different purposes and follow different rules. Once you understand how each one works, you can write a stronger offer and protect your money.
In this guide, you will learn what each payment is for, who holds the funds, typical Frisco amounts and timelines, when money is refundable, and smart ways to negotiate in Collin County. Let’s dive in.
Earnest money vs. option fee
Both payments show the seller you are serious, but they do different jobs.
- Earnest money is a good‑faith deposit that goes to the escrow agent, usually the title company. It is applied to your closing funds if you complete the purchase.
- The option fee is a separate payment to the seller that buys you a short “option period.” During this period you can terminate for any reason as long as you follow the contract deadlines.
Texas contracts often use TREC forms that spell out both items, including amounts, timelines, and who receives the funds. The exact instructions in your contract control what happens next.
How payments work in Frisco
Who pays, who holds, and when
- Option fee: You pay the seller for the right to a short option period. Payment is delivered at contract execution or by the deadline in the contract so the option period is effective.
- Earnest money: You deposit funds with the designated escrow agent, usually the title company, within the timeframe in the contract. In local practice this is commonly due within 1 to 3 business days after the effective date.
Typical Frisco amounts and timelines
Local practice varies with price and competition, but here are common ranges in Collin County:
- Option fee: often $100 to $350 for many resale homes. In competitive situations some buyers offer $500 to $1,000 or more.
- Earnest money: often $1,000 to $10,000 for widely available resale homes. Many Frisco buyers put $5,000 to $20,000, especially for higher price points or competitive offers. A common rule of thumb is 1% to 2% of the purchase price, though flat dollar amounts are also used.
These are not legal requirements. Amounts shift with inventory, interest rates, and how hot a listing is. Confirm current expectations with your agent and the listing side before you write the offer.
Refundability rules that matter
Deadlines and notices control whether you get money back. The contract language is the final word, so follow it precisely.
Option fee refundability
- Purpose: The fee is paid for the unrestricted right to terminate during the option period.
- If you terminate during the option period: The seller keeps the option fee. Your earnest money is typically returned as long as you gave proper written notice within the deadline.
- If you proceed to closing: The option fee is customarily retained by the seller and is not applied to the purchase price unless your contract specifically says otherwise.
Earnest money and contingencies
Earnest money is applied to your closing funds if you complete the purchase. Return of earnest money depends on your contract and your compliance with contingencies:
- Terminate during a valid option period with proper written notice: Earnest money is typically refunded to you.
- Financing contingency invoked properly: If you cannot obtain financing and follow the contract’s notice and documentation rules, earnest money is usually refundable.
- Appraisal or title contingencies: If your contract includes protections and you terminate as allowed, earnest money is typically refundable.
- Buyer default: If you breach the contract or miss deadlines without a permitted reason, the seller may keep your earnest money as liquidated damages or pursue contract remedies.
If there is a dispute over earnest money, the escrow agent will usually hold funds until there is a mutual release or a decision through mediation or the courts. Keep copies of notices and proof of delivery.
Negotiation strategies Frisco buyers use
You can tune the mix of price, timelines, and deposits to make your offer stand out while managing risk.
Shorten the option period
- Moving from 7 days to 3 days can help in a competitive situation. Some buyers go to 1 to 2 days. Waiving the option period is the strongest move but carries the highest risk.
Increase the option fee
- A larger fee, such as $500 to $1,000, signals commitment. It does not replace earnest money. It simply pays for the short right to walk away.
Increase earnest money
- A higher deposit, such as $10,000 to $20,000 on a mid‑ to upper‑priced Frisco home, can build seller confidence. It is still part of your closing funds if you complete the purchase.
Combine levers
- Pair a modestly higher earnest deposit with a shorter option period and strong price. This can be competitive without fully waiving inspection rights.
Offer non‑monetary concessions
- Flex on closing date, consider a short rent‑back, or cover some seller costs. These tradeoffs can reduce the need for very high deposits.
Use escalation wisely
- If multiple offers are expected, escalation can focus the competition on price. Sellers still consider option and earnest terms when comparing risk.
Confirm new construction rules
- Builders often use different deposit and option structures. Verify the builder’s requirements and timelines before you sign.
Sample Frisco scenarios
First‑time buyer in moderate competition:
- Option fee: $200
- Option period: 5 days
- Earnest money: $5,000
Move‑up buyer in a multiple‑offer situation:
- Option fee: $500
- Option period: 2 days (or waived based on comfort)
- Earnest money: $15,000
Aggressive offer on a hot listing:
- Option fee: $1,000
- Option period: waived
- Earnest money: $25,000
Always align strategy with your risk tolerance, inspection needs, and financing protections.
Timelines you should expect
Frisco and wider Collin County often follow these timeframes:
- Option period: commonly 3 to 10 days. Competitive offers may use 1 to 2 days, or waive it.
- Earnest money due: commonly 1 to 3 business days after the effective date.
- Inspections: aim to schedule within 24 to 48 hours of contract execution so you can act before the option deadline.
- Closing: typical timelines are 30 to 45 days, depending on your lender and title.
Buyer checklist for Collin County
Use this simple list to stay organized and protect your funds:
- Confirm who holds earnest money and how to deliver it. Get the title company contact and escrow instructions in writing.
- Know every deadline in your contract. Track when earnest money is due, option period start and end, and when notices must be delivered.
- Decide your option period length and option fee upfront. Match to current competition and your comfort level.
- Prepare funds in advance. Title companies have specific wire rules. Call to verify instructions directly and watch for fraud.
- Book inspections immediately. Decide quickly on repairs, concessions, or termination before the option period ends.
- If using financing protections, follow lender timelines. Keep written proof if a denial triggers your right to terminate.
- Save copies of all notices and delivery receipts. Documentation supports earnest money return if needed.
Common mistakes to avoid
- Missing the earnest money deadline. Late delivery can be treated as a default under the contract.
- Assuming the option fee applies to closing. It is typically kept by the seller unless your contract says otherwise.
- Waiving the option period without a plan. If you waive, schedule pre‑offer walk‑throughs or quick inspections and understand the risk.
- Ignoring wire verification. Always confirm wiring instructions with the title company by phone before sending funds.
The bottom line for Frisco buyers
Earnest money and the option fee are powerful tools for shaping a competitive offer in Frisco. The option fee buys you time to inspect and decide. Earnest money shows commitment and becomes part of your closing funds. Get the amounts right, respect the deadlines, and use strategic levers that fit the current market and your comfort level.
If you want a clear offer plan tailored to a specific Frisco home, connect with Rich Johnson for a quick strategy session. Request a Free Valuation & Strategy Call and move forward with confidence.
FAQs
What is the difference between earnest money and the option fee in Texas?
- Earnest money is a good‑faith deposit held in escrow and applied to closing if you buy. The option fee is paid to the seller for a short period where you can terminate for any reason.
How much earnest money and option fee are typical in Frisco?
- Many buyers offer $5,000 to $20,000 in earnest money depending on price and competition, and $100 to $350 for option fees, sometimes $500 to $1,000 in hot situations.
Do I get my earnest money back if I terminate during the option period?
- If you deliver proper written notice within the option period deadline, earnest money is typically refunded. The seller keeps the option fee.
Can the option fee be credited at closing?
- Only if your contract explicitly states it will be credited. The common practice is that the seller retains the option fee.
What happens if the seller and buyer disagree about earnest money?
- The escrow agent usually holds funds until there is a mutual release or a decision through mediation or the courts. Keep all notices and proof of delivery.
