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  • Writer's pictureRobert Sosower

Due Diligence Fee vs. Earnest Money Deposit

The due diligence fee is completely different than the earnest money deposit. The due diligence fee is a payment from the buyer to the seller that is non-refundable and is negotiated between the buyer and seller. If the property gets to closing, then the due diligence fee is deemed part of the buyers down payment toward closing costs. Additionally, the buyer pays the due diligence fee directly to the seller, which gives the buyer exclusive rights to inspect the property and close on the contract without interference from other potential buyers. The due diligence fee is designed to compensate the seller for taking the property off the market.

Whereas the earnest money deposit is money that is given to the seller or their agent to show good faith when making an offer to purchase the seller’s property. The earnest money deposit is negotiated between the buyer and seller and is normally a small percentage of the purchase price of the property. The buyer gives the earnest money deposit to the escrow agent, who holds it as a credit toward the closing costs if the property closes. Additionally, earnest money is refundable if the buyer chooses to back out of the contract during the due diligence period.

In North Carolina, when you go under contract, you will encounter the due diligence fee and the earnest money deposit. The only rare time the due diligence fee will not stay with the seller is if the seller cannot hold up their end of the contract. Moreover, neither the due diligence fee nor earnest money deposit is mandatory. Therefore, when making a decision on the due diligence fee and earnest money deposit, make sure you know what liquid money you have and talk to your real estate agent for advice.

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