By: Cara Dudek-Petri Gibbons


Every state is different when it comes to real estate transactions. Some states you’ll close with an attorney, and some states you’ll close with a title company. Some states have “escrow” periods, and some states have built in financing contingencies. What you experienced when you bought and sold in say Florida, will not be the same experience you’ll have when you’re buying and selling in North Carolina.

One of the biggest differences with buying in North Carolina is we have what is called a “due diligence period.”  This is defined within our Standard Offer to Purchase and Contract that North Carolina Realtors use that has been approved and drafted by the North Carolina Bar Association and North Carolina Association of Realtors.  Due diligence is, “Buyer’s opportunity to investigate the property and the transaction contemplated by the contract, including but not necessarily limited to the matters described by the contract, to decide whether Buyer, in Buyer’s sole discretion, will proceed with or terminate the transaction.” This means the Buyer has a period of time that is negotiated and written into the contract to complete any and all inspections on the property. During this time the Buyer can terminate the contract for any reason, or no reason.

The opportunity to conduct your due diligence though does not come without a price. The Standard Offer to Purchase and Contract has mainly two options for Buyers to put down deposits: the due diligence deposit and your earnest money deposit. The due diligence deposit is due as soon as the contract is fully executed, and the Buyer pays that directly to the Seller. This amount is also non-refundable. If you decide to terminate the contract after you conduct your inspections or even 1 day after you sign the contract because you got cold feet, the Seller still keeps this money. Earnest money is held by the escrow agent, typically the closing attorney, and is refundable to a Buyer if they terminate within the due diligence period. Earnest money is either due within five (5) days of going under contract, or at a specific date written into the contract.

The theory behind a due diligence deposit was intended to compensate Sellers for taking their home off the market and opening it up to a Buyer to complete inspections. Because the Buyer could terminate for any reason or no reason, it was a way for Sellers to be compensated for time off market since a Seller does not have that same freedom when it comes to terminating. If you sign a contract to sell, you have to sell.

In the last few years, the due diligence deposit has become a big bargaining chip. Because it’s non-refundable and put directly into the Seller’s pocket, Buyers have been using it as a means to make their offer stand out in a competitive cut-throat market. It has been used as a way to show how serious you are as a Buyer because what Buyer in their right mind would put down a non-refundable $50,000.00 deposit on a home and back out? In my opinion though, it has gotten far out of hand. A lot of Buyers don’t feel comfortable putting down that large of a sum of money knowing it’s non-refundable, or simply just don’t have that kind of money. It has made the market difficult for first time homebuyers and people who maybe have to sell to buy and don’t have large sums of cash on hand. Since the market has shifted a bit in the last 6 months or so, we have seen that due diligence deposits are trending back to a more manageable and reasonable amount of money, though in multiple offer situations we are still seeing some crazy numbers.

Please trust your Realtor when they explain to you this maybe foreign concept of “due diligence.” I have seen too many Buyers lose out on their dream home because they didn’t understand the concept fully, or trust that their Realtor was giving them accurate information regarding the importance of a competitive and aggressive due diligence deposit when submitting their offer. I hope one day due diligence fees have a cap on them to provide more of an even playing field for Buyers, but until that day, REST EASY and at least feel empowered with this knowledge.