Most Texas home purchases use the standard contract forms promulgated by the Texas Real Estate Commission, and two money items in those contracts confuse a lot of first-time buyers: the option fee and the earnest money. They are separate payments with separate jobs.
The option fee buys you the option period, a set number of days, negotiated in your offer, during which you can end the contract for any reason, or no reason at all. Buyers use this window for inspections, getting repair estimates, checking insurance costs, and making sure the home is right. If you terminate in time and follow the notice rules in the contract, you generally get your earnest money back; the option fee itself usually goes to the seller, though it is often credited to you at closing if you do buy the home.
Earnest money is a good-faith deposit that shows the seller you are serious. It is held by the escrow agent, usually the title company, not by the seller or either agent, and at closing it is normally applied toward your down payment and closing costs. Amounts vary with the price of the home and how competitive the situation is; your agent can tell you what is typical for that home and area.
Timing matters. The contract sets short deadlines, measured in days from the effective date, for delivering both the earnest money and the option fee to the escrow agent. Missing a deadline can cost you important rights, including the unrestricted right to terminate during the option period, so plan to deliver both promptly. Your agent will tell you the exact deadline in your contract.
After the option period ends, backing out becomes harder. You can still terminate under other provisions, for example if financing or the appraisal falls through under the terms of the financing addendum, but terminating outside those situations can put your earnest money at risk. That is why the option period is the time to raise every question and order every inspection you want.
Your EMR agent will walk you through each date on your contract and help schedule inspections inside the option period. This guide is general information, not legal advice; the contract you sign controls, and an attorney can answer legal questions about it.