Earnest Money & Builder Deposits: What's Actually Refundable in Texas

Every buyer asks some version of "what happens to my money if this falls through," and with new construction the answer is genuinely more layered than with a resale purchase. Builders use different deposit structures than a typical resale contract, and the refund rules aren't always what buyers assume walking in.

Earnest Money vs. Option Fee — They're Not the Same Thing

In a standard Texas resale contract, earnest money and the option fee are two different things serving two different purposes. Earnest money — typically ranging from one to several thousand dollars — is held in escrow, usually by a title company, and gets applied toward your down payment and closing costs at closing. The option fee is much smaller, typically $100 to $200 in Texas, paid directly to the seller for the right to walk away during your option period for any reason, no penalty. The option fee itself is non-refundable by design — that's what you're paying for the right to inspect and reconsider — but it credits toward the purchase at closing if you proceed.

New Construction Changes the Math

Builder contracts frequently blend these concepts differently than a resale contract does, and the specific language in your builder's paperwork controls everything here — not the general custom you might expect from a resale deal. Some builders require a much larger upfront deposit than a resale earnest money amount, particularly for a home already started or one requiring custom selections, and the refund conditions attached to that deposit are written entirely by the builder's legal team, not a standardized state form.

The Clause That Actually Matters: What Counts as Default

Read your builder contract specifically for what triggers forfeiture of your deposit. Most builder contracts allow the builder to keep your deposit if you (the buyer) default — meaning you back out for a reason not covered by a contingency the contract allows. But contracts vary widely on what actually counts as buyer default versus a situation where you're entitled to a refund: financing falling through despite a good-faith effort, the builder missing a contractual completion deadline, or the builder unilaterally changing terms (like a builder trying to raise the price after signing due to rising material costs, which isn't automatically allowed unless the contract has specific language permitting it).

What to Actually Verify Before You Sign

Get the refund conditions in writing, in plain language, before your deposit leaves your account. Ask your builder's sales representative directly: under what specific circumstances is my deposit refundable, and how long does a refund take to process if it's owed?

Understand your financing contingency, specifically. If your loan approval falls through despite reasonable effort on your part, most well-drafted contracts protect your deposit — but "reasonable effort" is doing a lot of work in that sentence, and a builder can dispute whether you made one. Keep documentation of every step in your financing process in case this becomes a dispute.

Know whether your deposit is held in escrow or by the builder directly. A deposit held by a neutral third party (a title company or attorney trust account) offers more protection than money paid directly into the builder's operating account, since a builder holding your money directly has more practical leverage in a dispute.

If a builder tries to raise your price after signing, don't assume you have to accept it. Unless your specific contract includes an escalation clause tied to material costs or another defined trigger, a unilateral price increase after a signed, fixed-price contract may put the builder in breach — which is a very different legal position than you defaulting. This is exactly the kind of dispute worth a real estate attorney's eyes before you either pay the increase or walk away.

The Bottom Line

New construction earnest money and deposits aren't governed by the same standardized forms and customs as a resale purchase — they're governed by whatever your specific builder wrote into their specific contract. Read that section before you sign, not after something goes wrong, and don't assume your resale-transaction assumptions about earnest money automatically transfer to a builder deal.