Earnest Money and Option Fee Delivery Timelines

In Texas, time is of the essence for contract execution. Delivering earnest money and option fees within the strict contractual timeline is vital to securing transaction rights.

Why the Correct Option is Right

Option B is correct because the deadline is strictly three calendar days after the contract’s effective date, and must be delivered by 5:00 PM local time. If the third day falls on a Saturday, Sunday, or legal holiday, the deadline is automatically extended to the next business day.

Why the Other Options are Traps

• Option A is a trap because “business days” is the incorrect unit. The contract uses calendar days for this calculation.
• Option C is a trap because seven days is too long, and “opening escrow” is not the triggering date; the contract’s effective date is the trigger.
• Option D is a trap because the earnest money must be deposited immediately at the start of the contract, not at closing.

The Exam Trap

A common test question is: What happens if the buyer fails to deliver the option fee within the 3 days? If the buyer deposits the earnest money but fails to deliver the option fee on time, the contract remains valid, but the Option Period is void. Sponsoring buyers lose their unrestricted right to terminate under Paragraph 23.

Worked Texas Example

Scenario: Buyer’s agent Tyler executes a contract on Wednesday, October 10th. Sgreeing to deliver the earnest money and option fee, Tyler’s client mails a check which arrives at the title company on Monday, October 15th. Outcome: The 3-day deadline was Saturday, October 13th. Sgreeing with weekend rules, the deadline was extended to Monday, October 15th. Because Tyler’s client delivered it on Monday by 5:00 PM, they are in full compliance.