UNDERSTANDING NORTH CAROLINA'S DUE DILIGENCE FEE

IS THE DUE DILIGENCE FEE REFUNDABLE? 

The North Carolina Offer To Purchase contract states that the due diligence fee is non-refundable unless the buyer closes on the property. If the buyer *doesn't close, for any reason at all, the fee will be retained by the seller as compensation for taking the property off the market. Should the buyer decide to proceed with the purchase, the due diligence fee will be credited towards the purchase price at closing and debited from the sellers side. *There are a couple exceptions to this: 1. if there’s a material breach by the seller and 2. if the buyer is using a FHA or VA backed loan. In these cases the due diligence fee may be refundable to the buyer.

HOW MUCH IS THE DUE DILIGENCE FEE? 

The specific amount of the due diligence fee can vary widely depending on factors such as the value of the property, local market conditions, and negotiation between the parties. And while North Carolina law does not mandate a specific amount for the due diligence fee, meaning the fee could essentially be zero dollars, the law does require that any due diligence fee be negotiated and agreed upon by both seller and buyer. We’ve seen due diligence fees in the hundreds of dollars and the hundreds of thousands of dollars. When considering the amount of due diligence fee, think how vested you are in the property and about what amount you are willing to part with should you not close (for any reason) on the property. Discuss with your exclusive buyers agent what amount is best for your unique situation.

THE BENEFITS OF THE DUE DILIGENCE FEE TO SELLERS 

For sellers, the due diligence fee represents an opportunity to secure commitment from potential buyers while protecting themselves financially. By agreeing to a due diligence fee, sellers can ensure that buyers are serious about the transaction. Furthermore, the non-refundable nature of the fee provides sellers with a measure of compensation if a buyer backs out of the deal, compensating for the time the property was off the market.

THE BENEFITS OF THE DUE DILIGENCE FEE TO BUYERS 

Buyers, on the other hand, can strategically leverage the due diligence fee to their advantage. Offering a higher due diligence fee can make their offer more attractive to sellers, potentially giving them an edge in a competitive market. The fact that the fee is non-refundable unless the buyer proceeds to closing also underscores the importance of thorough due diligence on the part of the buyer prior to committing to the offer.

CONCLUSION, REAL LIFE QUESTIONS, ANSWERS AND TAKE AWAYS 

✅ The Due diligence fee is not required, however, looking at it from the perspective of a seller, as a buyer would you rather accept an offer with a due diligence fee or without one?

✅ The due diligence fee is payable to the seller on the date the contract is executed by both parties. So if the effective date is today, then the fee is due today and payable to the seller today. Once received, the seller will deposit it into their bank account.

✅ I’m a buyer and I have a fully executed contract but didn’t provide the due diligence fee yet to the seller (or they didn’t cash the check yet) and I’ve decided to back out of the contract. I’ll get my fee back right? because it was only a day or so?  No.

✅ That fee is the property of the sellers upon contract and they can take action to force you to provide it. Our offer was accepted today but it’s 8pm on a Friday, so it’s not really due until Monday right? No. It’s due to the seller the date the contract is executed. Real life: your agent may speak with the sellers agent and they may get approval that they can deliver the fee another day.

✅ The due diligence fee is not refundable to the buyer, unless the buyer proceeds to closing, at which time it will be credited back to the buyer and it will show as a debit from the seller, on the settlement statement.

✅ My inspection turned up a bunch of stuff that will cost tons of money to repair so I’ll get my due diligence fee back right? No.

✅ The seller checked off NO REPRESENTATION on everything and we found things wrong, so I’ll get my due diligence fee back right? No.

✅ If my bank conducts an appraisal and that appraisal doesn’t come in at purchase price, I will get my due diligence fee back right? No.