Published July 20, 2021
Due Diligence and Earnest Money 101
Due Diligence and Earnest Money 101
Attention, attention, class is now in session. In the home buying process there is certain language used that, if not properly explained and understood can prove daunting and confusing to the home buyer. It is imperative that as a home buyer you have an agent who not only understands but can explain these terms and deposits in a clear concise manner. These terms will be explained as they relate to the buyer. Being that our team is based in North Carolina the explanation of due diligence and earnest money deposits will be as they relate to North Carolina Real Estate. Now for the moment you have been waiting for…….
What Is Due Diligence?
Due Diligence is the buyer’s opportunity to engage in a process of further investigation of the property as described in the Offer to Purchase. There is a specified period of time agreed to by the seller and buyer. As a buyer, it is your opportunity to gather information about the property and surrounding area to help you make an informed decision about whether this is the right home for your needs. The fee, if any, is negotiated and paid by the buyer directly to the seller for the right to conduct “Due Diligence”. The amount of the fee may be dictated by such matters as the current state of the market, number of days on the market, personal circumstances of buyer and seller, and the length of the “Due Diligence” period.
Where Does Due Diligence Go?
Due Diligence goes directly to the seller. This money is non-refundable and compensates the seller for taking the property off the market while inspections are completed. If the buyer decides to walk away during the due diligence period they only “lose” their due diligence deposit.
How Long Is the Due Diligence Process?
The Due Diligence period is negotiable between the buyer and the seller. The buyer can terminate the contract for any reason or no reason at all during this time period. The Due Diligence period will automatically terminate at 5:00 P.M on the end date.
Is Due Diligence Refundable?
No. No. No. (Except in a seller breach of contract) But for all intents and purposes, No!
On to the next topic….
What Is Earnest Money?
Earnest Money is money you give to the sellers to show your good faith when making an offer to purchase property.
Where Does Earnest Money Go?
Earnest Money is deposited into a trust or escrow account and held until closing, generally by the closing attorney.
How Much Is The Earnest Money Deposit?
While earnest money is not required for a contract to be valid, it is often dictated by the seller’s goals and objectives and the current state of the market, it is always negotiable.
Is the Earnest Money Deposit Refundable?
The earnest money deposit is refundable until 5:01 p.m. when the due diligence period terminates and then the earnest money deposit is no longer refundable.
Just as the title alludes, 101 is an introduction to these topics and these terms, periods, and deposits can certainly be expounded upon further. Our team is here to align on your goals and objectives and serve as your trusted expert in all things real estate. We serve the Triangle area and it would be an honor to serve you, whether you are a first time home buyer or a tenth time home buyer, we are well versed in today’s market and are here for you. If you are not currently in the market, perhaps you may know someone who is, we would be happy to help as well!
Andrew Hening
Leads Manager
