Buying or selling a home in North Carolina means you’ll hear the terms Due Diligence Fee and Earnest Money Deposit. While both involve money paid by the buyer, they serve very different purposes in a real estate transaction. Here’s what you need to know:
Due Diligence Q&A
Q: What is Due Diligence?
A: Due Diligence is a negotiated period of time in which the buyer investigates the property. During this time, the buyer may schedule inspections, secure financing, order an appraisal, review covenants or restrictions, and more. Before the end of this period, the buyer can terminate the contract for any reason.
Q: Is there always a Due Diligence Fee?
A: No. North Carolina law does not require a fee, but most sellers expect it and factor it into their decision when reviewing offers. It’s seen as compensation for taking the home off the market while the buyer does their research.
Q: How much is the Due Diligence Fee?
A: The amount is negotiable. It’s usually a small percentage of the purchase price and can vary based on market conditions.
Q: Who receives the Due Diligence Fee?
A: It is paid directly to the seller and is typically non-refundable.
Q: Is the fee credited at closing?
A: Yes. If the transaction closes, the due diligence fee is applied to the purchase price.
Q: What happens if the buyer cancels during Due Diligence?
A: The seller keeps the due diligence fee, but the buyer usually receives a refund of their earnest money deposit (if one was paid).
Q: What if repairs are needed during this period?
A: Buyers and sellers can negotiate repairs or financial credits. Sellers are not obligated to make repairs, but agreements should be documented and signed by all parties before the Due Diligence period ends.
Earnest Money Q&A
Q: What is an Earnest Money Deposit (EMD)?
A: Earnest Money is a deposit a buyer makes to show good faith when submitting an offer. It is credited back to the buyer at closing.
Q: Is Earnest Money required?
A: No. It is not required by law, but sellers often view it as a sign of commitment.
Q: How much Earnest Money is typical?
A: The amount is negotiable and depends on market conditions, property type, and whether it’s new construction or resale.
Q: Who holds the Earnest Money?
A: Earnest Money is usually held in a trust account by the closing attorney or the real estate firm. Note: Century 21 Total Real Estate Solutions does not hold earnest money directly.
Q: What if the EMD check bounces or is late?
A: The buyer may be in breach of contract, which could make the contract voidable by the seller.
Q: Is Earnest Money the same as Due Diligence?
A: No. The Due Diligence Fee is separate, non-refundable, and paid directly to the seller. Earnest Money is refundable under certain circumstances.
Q: Can a buyer get Earnest Money back if the deal falls through?
A: It depends.
-
If the buyer fails to meet their contractual obligations (for example, loan denial after Due Diligence), the seller may keep both the Due Diligence Fee and Earnest Money.
-
If the seller breaches the contract (for example, cannot provide clear title), the buyer is entitled to a refund of both.
👉 Bottom Line:
-
Due Diligence Fee = Paid directly to the seller. Non-refundable.
-
Earnest Money = Held in trust. Refundable in certain situations.
Both are important parts of a North Carolina real estate contract, but they protect different interests in the transaction.
