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Is there really a difference?
Yes, there is a difference:
Due Diligence Fee is a fairly new concept in NC, and it can be confusing to many buyers at first. Prior to 2011, when you were buying a home, the only money you had to pay up front was Earnest Money. This was mainly to protect the buyer. But in 2011, the North Carolina Real Estate Commission revised the offer to purchase contract to add “due diligence” in order to protect both buyers and sellers.
So What is the Difference?
Earnest Money:
Earnest Money (EM) is paid up front, at the beginning of the contract, usually paid to an “escrow agent” such as an attorney or the listing agency’s trust account. This is sort of like “good faith” money, and shows that you are “earnest” about buying the home. It shows the seller that the buyer is serious. When you put earnest money down, it will be credited back to you at the closing table when you close. On the flip side, if the contract falls through for any reason such as; problems with the financing, loss of job, bad inspections, etc. The buyer can get the earnest money back This sort of gives an “out” to the buyer, but not so much the seller. When the house went under contract, the seller took the house off the market (possibly losing out on other buyers) and started packing everything to move.
Due Diligence Fee:
Due Diligence fee is also paid upfront, however unlike Earnest Money, the Due Diligence fee (DD) is paid directly to the seller. The seller gets to deposit the money into their personal account and they can keep the money, no matter what. With the DD fee, the buyer also asks for a due diligence period (usually 30-45 days) that allows the buyer to do their “due diligence” with inspections, appraisals, financing, etc. and gives them the right to back out for any reason. However, if the buyer backs out, they do not get due diligence fee back. – Remember? It is the sellers to keep, no matter what. On the flip side, if the deal closes, that amount is credited back to the buyer at the closing table, showing they have already paid that $$ towards the purchase of the home (therefore, acting as a down payment – paid to the seller). Once again, when the house went under contract, the seller took the house off the market (possibly losing out on other buyers) and started packing everything to move. So the DD is basically paying the seller for loss of time while the house was off the market.
To Sum It Up..
| EM | DD | |
| Is the fee paid up front? | yes | yes |
| If the deal closes, is the fee credited back at the closing table? | yes | yes |
| Is it refundable if buyer or seller backs out? | yes | no |
| Does the seller get to keep the money? | no | yes |
If you are in the Charlotte Metro and surrounding areas, or thinking about relocating to this beautiful state, contact me. I would love to help you elevate your living with home ownership!
Your Crafty Seller
Sandy Brest
