How is earnest money determined?

Earnest money is typically determined through negotiation between the parties involved in a real estate transaction. This amount can vary widely depending on various factors, including the local real estate market, the specifics of the property, and the preferences of the buyer and seller. There are no strict rules governing the percentage, allowing buyers and sellers to establish a mutually agreeable amount that demonstrates the buyer's serious intent to go through with the purchase.

While earnest money can sometimes be a standard percentage, like 1% to 5% of the purchase price, it is ultimately not fixed. The amount is not set by TREC (Texas Real Estate Commission) or predetermined like other fees might be. Instead, it is a matter of negotiation during the contract process, making it a flexible part of the agreement that reflects the specifics of the transaction. This emphasis on a negotiated agreement allows for adjustments based on the unique circumstances surrounding each sale.