What are the due diligence fee and earnest money in North Carolina?
In North Carolina, the due diligence fee is a negotiated payment made directly to the seller when the contract becomes effective, and it is generally non-refundable. Earnest money is a separate deposit held in escrow, and the buyer usually gets it back if they terminate during the due diligence period. Under NC REALTORS® Form 2-T, both are credited to the buyer at closing.
What is the due diligence fee?
The due diligence fee pays the seller for taking the home off the market while you investigate it. You and the seller negotiate the amount. There is no set percentage. It depends on the price, how much competition there is, the home's condition and how long a due diligence period you ask for.
Under Form 2-T, the fee is due on the Effective Date and must be delivered no later than the next banking day (paragraph 1(i)). It becomes the seller's property on the Effective Date. That is why it is generally non-refundable, even if you walk away for a reason the seller had nothing to do with.
What is earnest money?
Earnest money shows the seller you are serious, but it does not go to the seller. It is held in escrow by the escrow agent named in the contract, often a closing attorney or a brokerage trust account. The Initial Earnest Money Deposit is due within 5 days of the Effective Date unless the contract says otherwise. Form 2-T also allows an Additional Earnest Money Deposit due by a set date, if the parties agree to one.
What is the due diligence period?
The due diligence period is the window, set in the contract, when you investigate the home and your loan. During it, you can terminate for any reason or no reason by giving written notice before it ends. Use the time for:
A home inspection and any follow-up inspections, such as roof, HVAC or termite
Your appraisal and final loan approval
Homeowners insurance quotes, and flood insurance if needed
A survey, if you want one
HOA documents, including any rules on rentals
Reviewing the seller's disclosures: the Residential Property and Owners' Association Disclosure Statement, the Mineral and Oil and Gas Rights Mandatory Disclosure Statement, and a lead-based paint disclosure for homes built before 1978
When do you get the money back?
The sale closes: both the due diligence fee and earnest money are credited to you.
You terminate during the due diligence period: the seller keeps the due diligence fee, and your earnest money is refunded.
You terminate after the due diligence period without a contract right to do so: the seller keeps the due diligence fee, and your earnest money may go to the seller as well.
The seller materially breaches the contract: under Form 2-T you can terminate and get back both the due diligence fee and your earnest money, plus reasonable due diligence costs.
Every deal has its own facts. If a dispute comes up over who gets the money, talk to a real estate attorney.
How are they credited at closing?
Here is a simple example with made-up numbers. You buy a $250,000 home with a $2,000 due diligence fee and $3,000 in earnest money. At closing, both show up as credits on your side of the settlement statement, for a total of $5,000 toward your down payment and closing costs. The closing attorney handles the accounting.
If you are using a VA loan or down payment assistance, ask your lender how these credits will be applied. Some loan programs limit cash back to the buyer at closing, so the structure of your offer matters.
Tips for buyers
Only put at risk what you can afford to lose. Treat the due diligence fee as money you may not see again if you walk away.
Book inspections the day you go under contract. Inspectors, appraisers and contractors can be busy, especially during summer PCS season.
Get loan approval in the period. Do not let the due diligence period end before you know your loan is on track.
Know your deadlines. Put the due diligence end date and any additional earnest money date on your calendar.
Get advice. Ask your agent about local norms and a real estate attorney about legal questions.
Having moved three times with the Air Force, I know a new state's rules can catch you off guard. For people moving to North Carolina, the due diligence fee is often the biggest surprise, because most states do not use one.
What do sellers look for?
Price is only part of an offer. Sellers in the Fayetteville area often weigh:
The due diligence fee. A larger fee signals commitment, since the seller keeps it if you back out.
The length of the due diligence period. A shorter period means less time off the market with an uncertain outcome.
Earnest money. A solid amount adds confidence.
A strong pre-approval. Sellers want to know the loan will close.
A closing date that fits. Many local sellers are timing a PCS move, so flexibility can help.
The right mix depends on the home and how much interest it has. A home that has sat for a while may accept a smaller fee than one with several offers.
Frequently asked questions
Is the due diligence fee refundable in North Carolina?
Generally, no. It becomes the seller's property on the Effective Date. It is refundable only in limited cases the contract states, such as a seller breach, and it is credited to you if the sale closes.
How much is a typical due diligence fee in Fayetteville?
There is no standard amount. It is negotiated and depends on the price, competition, the home's condition and the length of the due diligence period.
Who holds the earnest money?
The escrow agent named in the contract, often the closing attorney or a brokerage trust account. It is not paid to the seller.
When is earnest money due in NC?
Under Form 2-T, the Initial Earnest Money Deposit is due within 5 days of the Effective Date unless otherwise agreed.
Next steps
Want to see how an offer comes together, step by step? Download my free Home Buyer's Guide. Selling instead? My Home Seller's Guide explains how to compare offers. Call or text me at 910-718-9733, seven days a week.
About the author
Jesse Dickenson is a REALTOR® and the Property Manager at Brookdale Property Management LLC in Fayetteville, NC (NC broker license #368428). A U.S. Air Force veteran with three PCS moves behind him, he helps buyers, sellers, and rental owners across Cumberland County and the Fort Bragg area. Call or text 910-718-9733, 7 days a week.
