In Texas, earnest money is usually held by the title company or another escrow agent named in the purchase contract, not by the seller. Its purpose is to show the buyer is serious and to protect both sides while the deal moves forward.

The contract controls who receives and holds the funds. In most Texas transactions, the buyer must deliver earnest money to the title company within the time required by the contract. That escrow holder then keeps the money in a trust account until closing or until the contract is properly terminated.

A seller generally should not hold earnest money in a standard Texas real estate deal. Using a neutral third party helps avoid disputes and keeps the funds separate from either party’s personal or business money. That separation matters because earnest money is not the same as a down payment paid at closing.

Texas real estate agents and students should also know that earnest money is different from an option fee. The option fee may be paid directly to the seller for the buyer’s option period, while earnest money is typically deposited with the title company or escrow agent.

Understanding that distinction is essential for licensing exams and real-world transactions. If you are studying for a Texas license, a good option is Leap Real Estate’s Texas pre-licensing course: https://leaprealestate.com/state-licenses/texas-pre-licensing.

Because Texas real estate rules can change, it is smart to verify current requirements with the Texas Real Estate Commission before relying on any single source. Knowing who can hold earnest money is a basic but important part of protecting clients and staying compliant.