Due Diligence Vs. Earnest Money Deposit - What is the Difference? | Summary and Q&A

TL;DR

Due diligence fee is non-refundable and paid directly to the seller, while earnest money deposit is refundable until the end of the due diligence period.

Key Insights

• 🤑 North Carolina has a due diligence fee and an earnest money deposit in real estate transactions.
• 🤑 The due diligence fee is paid to the seller, while the earnest money deposit is paid to the escrow agent.
• 🤑 The due diligence fee is non-refundable, while the earnest money deposit is refundable until the end of the due diligence period.
• ❓ It is important for buyers to understand the timing and refundability of these deposits to make informed decisions.
• ❓ Both deposits can be applied towards the purchase price at closing.
• 🥳 The terms of these deposits can be altered through a written agreement signed by the parties.
• 🆘 Consulting with a real estate attorney can help in drafting an addendum to modify the standard offer to purchase.

Transcript

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Questions & Answers

Q: What is the purpose of the due diligence fee in North Carolina real estate?

The due diligence fee is paid to the seller and allows the buyer exclusive rights to inspect the property and compensate the seller for taking it off the market.

Q: Can the due diligence fee be refunded?

No, the due diligence fee is non-refundable. Buyers should carefully consider how much they are willing to lose if the property doesn't meet their expectations.

Q: Where is the earnest money deposit paid in North Carolina?

The earnest money deposit is paid to the escrow agent, usually the closing attorney in North Carolina.

Q: Is the earnest money deposit refundable?

The earnest money deposit is refundable until the end of the due diligence period. If the contract is terminated after this period, the earnest money deposit is non-refundable.

Summary & Key Takeaways

• Due diligence fee is paid to the seller, allowing the buyer to inspect the property exclusively during a due diligence period.

• Due diligence fee is non-refundable, so buyers should consider how much they are comfortable losing if the property doesn't meet their expectations.

• Earnest money deposit is paid to the escrow agent, showing the buyer's intention to proceed with the closing.

• Earnest money deposit is refundable until the end of the due diligence period, but non-refundable if the contract is terminated after the due diligence period.