What's the difference between Due Diligence Fee and Earnest Money?

Today I’m going to be discussing the difference between a due diligence fee and an earnest money deposit. 

Here in North Carolina, we have what’s called a due diligence period. It’s the period of time in which a buyer can do their inspections, appraisals, loan qualifications, and more. However, there’s a fee that comes with this period that is paid directly to the seller and is non-refundable. When you go through with the purchase of the house, it is applied to the purchase.

“The earnest money deposit is refundable under certain conditions.”

The earnest money deposit is similar, but different in key ways. The earnest money is actually deposited in a trust account until closing. At closing, that money is also credited towards the purchase price. The important distinction is that the earnest money is refundable under certain conditions, such as the home not appraising or in a home inspection dispute. You can terminate the contract and get the earnest money back within the due diligence period.

If you’re working with an experienced agent, they can structure your deal so that it’s better for the seller without you having to offer up more money on the purchase price. A higher due diligence fee or more earnest money can be beneficial to both parties. 

If you have any questions about either your due diligence fee or your earnest money deposit, or anything else relating to real estate for that matter, don’t hesitate to give us a call or send us an email. We look forward to hearing from you soon.

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