If you’re considering purchasing a home in North Carolina and you’re coming from out of state, there are a few unique aspects of our real estate process that you should be aware of. One of the most important—and the one I get the most questions about—is the North Carolina due diligence fee.
What is the North Carolina Due Diligence Fee?
The due diligence fee is a payment made directly to the seller when you go under contract to buy a home in North Carolina. This fee is separate from the earnest money deposit, which you may be more familiar with from transactions in other states.
In essence, the North Carolina due diligence fee is a non-refundable payment (fee = nonrefundable by definition) that compensates the seller for taking the home off the market while you, the buyer, conduct inspections, secure financing, and ensure the property meets your needs. Think of it as a “good faith” payment that shows you’re serious about purchasing the home.
The earnest money deposit (deposit = refundable, by definition), on the other hand, is paid to the closing attorney to be held in their trust account until funds are disbursed at closing. It can be refunded to the buyer for any reason prior to due diligence deadline.
How does the North Carolina due diligence fee work?
First, let me show you how we note this on the official form 2-T, the “Offer to Purchase and Contract.” This section appears on the first page of the form, and it’s where we note all the dollar amounts related to the purchase price.
As you can see, the first line is where we list the purchase price/offer amount (which is due immediately upon offer acceptance by the seller). The second line is where we enter the due diligence fee amount (which is due within five days of the seller’s acceptance), and the third line is where we note the earnest money deposit.
Once your offer is accepted, I will work with the listing agent to determine how their seller prefers to be paid the due diligence fee. This can be done in several ways – including payment apps like Zelle/Paypal/Venmo (as long as payment goes directly to the seller from the buyer or into an account connected to a broker’s trust account) or check. Usually, the buyer either gives me a check to deliver to the listing agent or their office, or the seller mails the check directly to the seller (oftentimes using expedited/trackable postage). The due diligence fee can even be paid by cash, but it’s not preferred as it’s harder to track and must be deposited into a trust account and then be disbursed to the seller from that account.
As for the earnest money, I usually collect a check from my buyer, made payable to the closing attorney, to be deposited into the attorney’s trust account. Buyers may also elect to drop the check off at the attorney’s office if it’s convenient for them.
Remember, both the due diligence fee and earnest money deposit are applied to the buyer’s amount due at closing. They don’t just disappear into thin air!
Why does North Carolina have a due diligence fee?
North Carolina’s real estate process is different from most other states in that it offers additional protection for sellers (via the due diligence fee) in addition to protection for buyers (the due diligence period during which the earnest money may be refunded).
For the seller, the due diligence fee provides a sense of security. When they accept your offer and take their home off the market, they’re missing out on potential opportunities from other buyers. The fee compensates them for this risk and ensures that the buyer has “skin in the game” and won’t just back out for little or no reason. It demonstrates a buyer’s commitment to seeing the transaction close.
For the buyer, the due diligence period offers flexibility. You have a set period—typically 2-3 weeks—to conduct all necessary inspections, negotiate any repairs, and finalize your financing. If something arises during this period that makes you reconsider your purchase, you can walk away, though you will forfeit the due diligence fee.
How much is the due diligence fee?
The amount of the due diligence fee can vary widely depending on several factors, including the property’s price, the local market conditions, and the buyer’s level of interest. In a competitive market, the fee might be higher to make your offer more appealing to the seller. Conversely, in a slower market, the fee might be lower.
There’s no standard amount for the North Carolina due diligence fee, but it’s essential to remember that this payment is non-refundable. If you back out of the purchase for any reason during the due diligence period, the seller keeps the fee. However, if you move forward with the purchase, the due diligence fee is credited toward your closing costs.
When representing buyers, my goal is to offer the lowest due diligence fee possible to get the home under-contract for my clients. When representing sellers, of course, I want that fee to be as high as possible (within reason) to protect my seller clients.
What should out-of-state buyers consider?
If you’re coming from a state where due diligence fees are uncommon, this aspect of North Carolina’s homebuying process might feel a bit foreign. It’s crucial to work closely with a local real estate agent (like me!) who can guide you through the process, help you determine a reasonable due diligence fee, and ensure that your interests are protected during negotiations.
Conclusion
Understanding the North Carolina due diligence fee is a critical aspect of getting a property you love safely under-contract. While it may seem like an added expense, it’s a crucial part of the homebuying process here, offering benefits to both buyers and sellers. As you embark on your journey to find a home with me as your buyer’s agent, I’ll ensure that you make informed decisions every step of the way.
