what is the due diligence fee?


How do you buy a home? What are the stages of buying a home? And what is the most important thing that I need to know about buying a home in Wilmington? What is the due diligence fee? How does the due diligence fee differ from earnest money?


Hi, my name is Jennifer Bullock with Jennifer Bullock Team at RE/MAX Executive here in Wilmington, NC

I am here to tell you what you need to know on buying a home in Wilmington. Real estate 101 for the Wilmington, NC area.


First thing, the biggest part of our contract that people have a hard time, wrapping their head around, is the due diligence fee. This has been on our contract for several years, however, no one really used it until the market went crazy. So really,  people started using due diligence fee about 2 to 3 years ago. Now, it's on every one of our contracts.


So what is the due diligence fee? And what is Earnest Money? They are similar in that, as long as you buy the home, the due diligence fee and earnest money are applied to the purchase price of the home.  Once you go under contract, you have to write two checks; one for due diligence fee, one for earnest money. As long as you continue with buying your new home, then both of them are applied to the purchase price. For instance,  if you're spending $100,000 and you put $1,000 due diligence and $1,000 dollar earnest money. Then all the day of closing you owe $98.000 Pretty easy math. 


Then the question becomes, what is the difference in due diligence money versus earnest money? The difference is due diligence is a check or wired funds, but it is made out to the seller directly that money is non-refundable. Let me make that clear.  The due diligence is non-refundable. Earnest money is refundable as long as you terminate within the due diligence timeframe. Oh my, that's crazy, right?  Due diligence a timeframe and Due diligence fee.All of this and nobody has a clue what it means.


Due diligence timeframe is the amount of time that you have to do, all of your inspections, your appraisal,

review the paperwork, if your questions on zoning, handle the loan process. Anything that you need to do in order to buy the home is done within the due diligence time frame. It is a timeframe that you set with your agent. The typical due diligence timeframe in the Wilmington market is roughly 20-25 days.


Back to the due diligence fee. It is a check, money order, or wired funds that goes directly to the seller.

Non-refundable. So here are the questions everybody asks me. What if the house doesn't appraise?

Do I get my due diligence money back? The answer is no, you do not. Second question. What happens if something is crazy on the home inspection and it needs a hundred thousand dollars worth of

work and I'm only spending a hundred thousand dollars on it. What if I don't have the money to make the repairs and the seller refuses to do any of the work. Do I get the due diligence fee back?  Answer is no.


Basically, the only way that you would get the due diligence fee back when buying a home in the Wilmington area, is if the seller was in breach of the contract. Now, be clear. I am not an attorney. If you have attorney questions, I can give you a list of attorneys that we use, certainly.


But as far as the due diligence money versus the earnest money, the due diligence money is non-refundable, unless the seller terminates, or if the seller is in breach of the contract. The earnest money is refundable as long as you terminate within the due diligence period. Hopefully that clarifies it. Again, both of them come off the price of the house. You don't lose the money unless you terminate the contract.

The way the contract reads, the “due diligence deposit is the buyer's right to terminate the contract for any reason or no reason” as long as you do so within the due diligence time frame, and it must be in writing.


I have also attached Q & A for Due Diligence Fee I have gotten from the NC Real Estate Commission.

Because it is the number one thing that all buyers and sellers both have questions on.

So I am going to put that below and again, that's from the North Carolina real estate commissions,

with all the common questions and answers on due diligence fee in NC.


If you have any more detailed questions on the due diligence money, or the earnest money, please feel free to call, email, or text me. (910) 512-4080 JenniferBullock@HomesForSaleWilmington.com I'm certainly here and I would gladly help you with any questions you may have about buying or selling a home in Wilmington NC. Look forward to helping you buy a home and our  beautiful area.


Q & A on Due Diligence Fee from the NC Real Estate Commission