Earnest Money Escrow Timelines
Earnest money and option fees must be delivered to the escrow agent by the third calendar day after contract execution.
Under TREC Rule §535.146 and the standard TREC contract, a buyer's agent must deliver the earnest money and option fee to the designated escrow agent (title company) within 3 calendar days of the contract's effective date.
TREC Rule §535.146— Handling Trust Money
Earnest Money and Option Fee Delivery Timelines
In Texas real estate, transaction security depends on strict adherence to contract timelines. The delivery of the earnest money and option fee (which secures the buyer’s unrestricted right to terminate) is governed by rigorous deadlines under TREC Rule §535.146.
Why This Rule Exists
Historically, buyers would tie up properties for weeks without actually depositing funds, leaving sellers vulnerable. Combined with the option period, these tight timelines force buyers to act in good faith and deposit funds immediately to secure their contract rights.
The Exam Trap
A common test trap is the calendar day versus business day distinction. Sponsoring agents often default to “business days” for deadlines, but this is a calendar day deadline. If a contract is executed on Thursday, the earnest money must be delivered by Sunday at 5:00 PM. However, if the deadline falls on a weekend or legal holiday, the deadline is extended to the next business day (Monday).
Worked Texas Example
Scenario: Buyer agent Liam executes a contract on Tuesday, June 2nd. The buyer needs to deliver the earnest money and option fee to the title company. Outcome: Day 1 is Wednesday, Day 2 is Thursday, and Day 3 is Friday. The earnest money must be deposited with the escrow agent by 5:00 PM on Friday, June 5th. If Liam deposits it on Saturday, the buyer is in default and the option period is void.
Core Comparison Breakdown
| Delivery Target | Deadline Specification |
|---|---|
| Escrow Agent (Title Company) | Within 3 calendar days after the Effective Date of the contract |
| Extension for Holidays/Weekends | If the 3rd day falls on a Saturday, Sunday, or legal holiday, deadline extends to the next business day |
| Daily Cutoff Hour | Must be delivered by 5:00 PM local time on the date of the deadline |
Exam Tip
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