When purchasing a home in North Carolina, you will need to write two upfront deposits with the Offer to Purchase and Contract. The two upfront checks are called the “due diligence fee” and “earnest money.”
It is important to know that the due diligence fee is non-refundable, and if you are not careful, you could lose both upfront deposits and not end up with the house. Let me explain.
Check Number One: Due Diligence Fee
Due diligence is a negotiated sum the buyer gives to the seller to take the home off the market for the period of time needed to investigate the property, perform inspections, conduct appraisals, and so on. This money goes directly to the seller, is deposited immediately, and is non-refundable.
If all goes well in the property investigation period and the buyer decides to go through with the purchase, then the due diligence fee is applied as a credit to the final sum due at closing. If the buyer cancels the contract during due diligence, he or she will receive a refund of the earnest money within a few days. However, if the clock runs out, which is at 5 pm on the negotiated date, the buyer’s earnest money will be forfeited.
So How Much Money Could I Lose?
Since due diligence and earnest money are both a negotiated sum, it is imperative that you have a skilled and knowledgeable real estate agent to advise you. Price range, location, and interest from other buyers will play a significant role in the amount of money you will need to secure a contract with a seller.
In general, homes with no other offers may only require $500 to $1,000 up front to pique a seller’s interest in holding his or her house off the market for you. Time periods of 3 weeks to 30 days may also be considered. If the home has multiple offers, the required amount may jump to $2,000 to $5,000 in order to compete with the other buyers trying to win the house.
Keep in mind that sellers want the highest deposit with the least amount of time provided, while buyers want the lowest deposit with the most amount of time. Your buyer agent has your best interests at heart and will successfully negotiate the best deal for you.
Check Number Two: Earnest Money
Earnest money is also a negotiated deposit sum that will be credited toward the purchase at closing. Usually a range of 1% to 3% of the contract price is acceptable to sellers in North Carolina. This is low compared with some states with acceptable ranges of 5% to 10% of the contract price in escrow. The earnest money check is deposited into a regulated trust account of the attorney closing office or listing firm.
Buyers can terminate a contract at any point up until 5 pm on the last day of due diligence and receive their earnest money back. If they terminate late, then their earnest money is also forfeit. Timely investigation and negotiation in writing is imperative to protecting your money.
Linda Craft & Team, REALTORS®
To avoid losing your hard-earned money, it is important to work with a real estate agent who knows how to navigate contracts, negotiate prices and timetables, resolve complications, and request additional time for due diligence if needed. An agent also provides buyers with important educational services to help you understand every interaction along the way.
At Linda Craft & Team, REALTORS®, we have over 30 years of experience developing our techniques and providing buyers in the Greater Raleigh area with exceptional service. As the #1 real estate team in the Triangle, let us equip you with our wealth of knowledge and deliver you a home buying experience you will never forget.
Schedule an appointment with us today at 919-235-0007 or review our home buying resources for a full listing of all of our services and more!