Option Fee

An option fee is a payment used in Texas real estate contracts that buys the buyer an unrestricted right to terminate during a set option period. It is separate from earnest money and is normally not refunded if the buyer ends the deal.

Under the Texas Real Estate Commission standard contracts, the buyer delivers the option fee to the title company within three days after the effective date, and it is credited to the sales price at closing. If the buyer terminates on time during the option period, the seller keeps the option fee and the earnest money is refunded.

So a buyer on a $500,000 Texas home might deposit $10,000 in earnest money plus a smaller option fee. The option fee buys the exit; the earnest money is what is at stake after the option period ends. Other states do not use this structure, so see how much earnest money to put down for the general picture.