I know I will be explaining this question for a long time to come! As of January 1st 2010 in North Carolina, we no longer have just the Earnest Money deposit option on the Offer to Purchase Sales agreement. Our new forms are now are more like the commercial forms and offer a Due Diligence period for buyers to do all their inspections, appraisals, review of covenants and restrictions, surveys……..you name it. Previously, there was a negotiated amount of earnest money that would be held with the listing firm, now there is “due diligence” money as well as Earnest Money to be negotiated. The new due diligence fee will be made out directly to the seller and will be non-refundable unless there is a breach by the seller. The buyer will be credited this fee at the closing.
The Due Diligence fee enables the buyer to back out of the contract for ANY reason or NO reason up to the specified due diligence date. For agents, this new form simplifies things as far as watching for critical dates. Just remember the Due Diligence Date and the closing date and you are good to go!
WARNING: As buyer’s agents, this will for force you to do a lot more of your homework upfront before signing the offer- if you miss something critical, your buyer will not be pleased they have lost their money due to something you overlooked. Talk with your lender and be sure you know how long it will take to get a full loan commitment. The buyer wants to put down as little as possible for the longest amount of time they can get.
For listing agents, they will need to get more information about the home from their sellers and be prepared to give a lot of documentation to the buyer. The seller wants as much money as possible for the shortest amount of time. It will be interesting to see how this shakes out this year.
Both the due diligence fee and the earnest money deposit are both negotiated between the buyer and seller and BOTH are not required. You could have a due diligence fee with no earnest money, due diligence with earnest money, no due diligence and earnest money or none at all.
The important part is to be informed, be prepared, work with a good Realtor® and do your homework.
Here are some links to additional information about the new Due Diligence Contract and how it will affect you: