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Earnest Money Agreement - For Sale by Owner

Do not send me email notifications for new answers. It's not mandatory BUT the value for the buyer is that he can cancel for ANY or NO reason - so, if inspections reveal bad items, the buyer can get out of the contract even if the seller is willing to repair them, i. Nobody likes to lose money but it's better to lose a small DD Fee than to make a bad investment. Typically How much do Home inspections cost. Can anyone explain the North Carolina Due Diligence fee?

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I don't see the value to the buyer, but it sure looks like a nice way for the seller to make a little money even if the deal falls through. Problem Select one Offensive content Irrelevant content Spam pure self-promotion Other. Your email Please enter a valid email address.

Making an offer on a house, and paying Earnest Money

Content flagged We will review this content. This service is temporarily unavailable. Please come back later and try again. Email Share on Facebook Tweet. Create an Email Alert. This alert is for the following: Buying Process Advice Type: Recipient's email Separate multiple addresses with a comma. Email has been sent! You will also receive a copy of email. This home has been saved! Go to My Zillow in the top right corner to see your saved homes.

Your Answer Upload Image. Email me when other answers are added. Share post on Facebook. Best Answer Selected Once you select this as the best answer, it cannot be changed. Best Answer Tim Moore, "Outer Banks N C" Agent 6 reviews. Can you write an offer, here in NC, with no due diligence money at all being offered to the seller?? You bet you can. The seller can accept it or refuse it too. On this side of the state we rarely see any due diligence money offered, it is very rare.

I am told that some areas of the state take the offer of due diligence money much more seriously and it is rare to not see some offered. How it differs from earnest money is that it is an appeasement to the seller to allow the house to be moved off the active status while you do inspections. In the past if you found a problem in the inspection period you had to ask the seller to fix it or live with it yourself.

Sometimes the seller said no and you had to fight to get back the earnest money and back out of the deal. With the new due diligence period you have that time period to do inspections and walk away for any reason what so ever. You don't need to even give a reason or argue about who will or should fix this or that and then fight to get back the earnest money deposit.

The new contracts also don't have the old loan contingency they use to have, which is a HUGE mistake by the Real Estate Commission in my opinion, so if you get up to a week away from the closing and then the lender turns you down you will lose the earnest money IF you are not still in the due diligence period. For this reason a good agent will make the due diligence period extend all the way to the closing date to protect the buyer in case the lender turns down the loan.

I think this needs to be addressed by the RE Commission, but it is the way it is now. In some areas, I am told, there is a lot of due diligence money offered and very little or no earnest money offered. It seems to vary by area in the state.

It is a confusing mess that the RE Commission needs to straighten out ASAP. Tom Gunn and sunnyview-you still put down earnest money IN ADDITION to the DD fee, so your comments don't make sense to me. Racheljones60 I think if you can prove fraud you can get your DD money back. Do read Tim Moore's comment. I had to learn the hard way meaning costly too. And talk to a good Real Estate attorney before signing another contract.

We lost our money because of this rule in Cary, NC. The seller knowingly we have picture proof did not disclose over 50 pages of horrific items gone bad in the "Property Disclosure Statement". Does anyone know what we can do for recourse? Our realtor doesn't seem to know anything about this and we have now walked away from the deal after padding the sellers pockets.

This seems wrong on so many levels and its very discouraging as a qualified buyer. Anyone who thinks the DD fee is simply a way for sellers to "make a little money" has been badly misinformed A thorough investigation of the DD provisions in NC contract will prove they are entirely to the benefit of the buyer and almost universally detrimental to the seller.

Seller Agents are apparently not wanting the DD issue to come up when they present a contract. Many are misrepresenting the DD issue and fee in order to make it easier to "get a contract". TREAT THE DD FEE AS YOU WOULD HAVE AN EARNEST MONEY DEPOSIT. A contract with no DD fee is WORTHLESS in protecting the seller for anything! Those recommending DD period run until closing obviously do not have seller interest at heart and are giving both seller and buyer bad advice.

Or they simply do not understand their responsibilities. Seller has no such option and no protection from the contract. What ever you call it, DD money or earnest money or a buyer's deposit, there are few protections under most contracts for the seller if the buyer backs out even at a very late date.

I don't have an issue with buyers who back out within a 2 week inspection period and don't see a better way to do it since due diligence is a key part of buying. That is not right. Some buyer's agents allow buyers to cancel without cause and too many seller's agent allow buyers to walk with their earnest money without consequence advising their seller to let it go.

Good contracts put the needle in the middle where there are consequences for both buyer and seller if they fail to meet their obligations. Seems to me when things go wrong the buyer is the one who walks with their money while the seller bears the costs.

Rick Creel has valid points and agrees that the DD issue can be either good or bad depending on the situation. From a seller perspective it's only value is in at least getting an offer. Whether an offer a buyer can walk away from at any time any contract in any industry has any other value is questionable. As I said before, most responding to this question seem to think it's great for the buyer and the agents with commissions to be had.

For the seller and for protection of his interest, without a DD fee, the contract is worthless. Might as well have a handshake or verbal agreement. Until the DD termination date has passed, the seller has many risks while the buyer has none. Remember, the DD clause states the contract can be terminated FOR ANY REASON OR NO REASON AT ALL by the buyer. Is it ethical for realtors WHO ARE SELLER AGENTS to decide that, for their area, full disclosure is not in their best interest?

Is it ethical for closing attorneys to express the opinion that a breach of contract by the buyer is not possible prior to the DD period ending What kind of mumbo jumbo is this? To be honest, some attorneys have stated this as fact while others admit it is only their opinion.

Everyone seems to think the boat should not be rocked and sellers should be glad to get whatever they get. If you're a buyer agent, good for you. If you feel and act this way as a seller agent, shame on you. Without a DD fee the seller is exposed to numerous costs for which the earnest money deposit is useless. That means the buyer HAS NO SKIN IN THE GAME. Sure, the buyer may have inspection and other costs IF THE BUYER SO CHOOSES. The seller most often has no choice in the costs incurred.

For example, sellers may have to quit their jobs, travel to find new home, pay related buyer costs at the new home, incur numerous expenses in planning the actual move including moving company deposits, deposits for utilities at new location. The list is almost endless. The earnest money deposit was designed to cover this if the buyer backed out of the contract. With DD and especially with no DD fee the seller has no protection for a buyer with no skin in the game who simply changes their mind.

A buyer can have a seller go through all the trials, tribulations, and COSTS of meeting the requirements of the contract THEN JUST WALK AWAY. The only protection the seller has is IF THE BUYER BREACHES THE CONTRACT prior to the end of the DD period. And this protection is most often disputed by closing attorneys who take the position that if the buyer terminates the contract, the earnest money goes to the buyer SIMPLY BECAUSE THAT HAS BEEN THE PRACTICE IS SOME AREAS.

It is an opinion, not a legal position. So far, I have found no litigation on this point. At issue is whether a real estate contract, the contract that provides for the DD rights, doesn't also provide the stated rights for the seller if the contract is breached prior to the DD date.

In other words, if a contract cannot be breached during the DD period, of what value or merit is that cont ract?? The contract gives the buyer rights under DD and the seller rights under earnest money deposit.

How can a contract provide one without the other? Rick Creel, "Rick Creel" Agent 7 reviews. As both a Buyers Broker and a Sellers Brokert I view the Due Diligence Fee from both perspectives. It can be good. It can be bad. No contract is deemed "worthless" because of a lack of a Due diligence Fee. Also, just because a home may be Under Contract does not mean it's off the market.

In fact, this broker has put in "backup offer's" on homes that were under contract. This homes were still listed in the MLS, Zillow and others. It's how my Buyer clients found them. My Backup Buyers have even been able to close on homes where the Primary Buyer had backed out. So, such listings were not, "off the market.

Demanding that Buyers must pay a Due Diligence Fee may not be in a Sellers best interest. It may mean whether or not they get an offer on a property. If it were to hold back a potential Buyer from making an offer that may very well close, this certainly would not serve the Sellers best interest.

There are just to many variables in real estate to dictate what one should or should not do. Certainly, too many to discuss in this forum.

In the end, it is up to the agent to explain the facts, including advising the Seller if they should or should not release any Ernest Money should the deal be rescinded. Brokers then respect their client, allowing the client to make the decision.

They are then properly representing their client, not personal preferences. From time to time they update such documents. Their goal is, "To protect the public interest in real estate brokerage transactions".

That includes both sides, as the Seller will most likely become a Buyer after the sell. It is up to us as Brokers to uphold those standards and promote professionalism. Are the comments written on this post by Licensed NC Real Estate Brokers? Brokers must fully understand their real estate market, which includes both the Buyers and Sellers perspective, to properly represent their clients.

Such markets vary from region to region in NC. What may work well in one area may not work as well in another. I hope these folk are not acting as SELLER'S AGENTS! A buyer that only has earnest money in the offer to purchase HAS NO SKIN IN THE GAME. With no DD fee, the buyer can cost the seller much inconvenience, actual expenses, and the disadvantage of taking the property off the market with no risk for the buyer at all. Most every house listed with a realtor in NC has a SELLER'S AGENT.

If that agent isn't fully informing the client that without DD fee THE CONTRACT IS WORTHLESS is doing the seller a serious disservice.

What good is a contract that allows one side to terminate it for ANY reason or for NO reason? It is worthless until after the DD period.

And so is the earnest money in most cases. As the above responses show, many realtors see not having a DD fee as a good thing. And it is FOR THE BUYER. It most certainly is not for the seller. Sellers, remember that until the DD period is over, YOU HAVE NOTHING. Seller Agents not fully advising their sellers of the risks of not having a DD fee are not representing their sellers' best interest and are exposing themselves to malpractice.

Along with the DD issue it seems many realtors and, in fact, closing attorneys are advising sellers that earnest money MUST be released to the buyer if the buyer terminates the contract before the DD date.

Factors Affecting Reimbursement of Buyer's Earnest Money

No discussion, no option. The earnest money goes back. It is only assumed. If a buyer breaches the contract PRIOR to terminating it, the seller has every right to refuse to release the earnest money. The agent holding the earnest money must then hold it for up to 90 days and if the parties cannot agree on disbursement the agent must turn the money over to an Interpleader or clerk of court for arbitration.

As it stands now, many seller agents are representing that NOT having a DD fee in the contract is a good thing! It is for the buyer and agents ONLY! It makes it much easier for them to get a contract. Choose your agent wisely! Is it still the "Best Answer". The Due Diligence Fee is actually a check that is made out to the Seller beginning on Day 1 with the Offer To Purchase.

The Ernest Money Deposit is an amount that is paid up front, but does not go to the Seller right away. It is held in an Escrow Account by an Attorney or perhaps a real estate firm. At the end of the Due Diligence Period time of inspections, etc this money is then considered to be transferred to the Seller. It, too, is credited to the Buyers account towards the Purchase Price.

However, should the Buyer back out after expiration of the Due Diligence Period or time the Buyer will lose those funds. Typically, a Buyer will not get any Due Diligence Fee returned should he pull out of any offer.

Ernest Money can be returned if a Buyer pulls out for any reason or no reason, provided the Buyer pulls out before the end of the Due Diligence Period. However, NC is a caveat emptor , or Buyer Beware state. This encourages inspections on any property. If a Seller is not willing or has a conflict in their schedule so as to prevent or delay inspections as suggested in another comment this allows the Buyer to back out without penalty to no fault of their own.

However, the Seller must sign a "release" for the Ernest Money Deposit. Also, the Buyer will have "skin in the game" in that the Buyer is paying for the inspections. Such inspections may reveal items that can be easily overlooked by both Buyer and Seller.

Moore suggested allowing Due Diligence to run up to closing. I can't see any self respecting Broker that is looking out for the best interest of his Seller to accept such an offer. Today, Buyers can get a pre-qualification letter to state if such are credit worthy.

I request such for any offers made to my Sellers. Then, about the only reason one would be turned down is if the property did not appraise for the Offered Price. A good real estate agent should have knowledge of Fair Market Value.

If so, then appraisals should not be a problem. After that time, the Ernest Money Deposit basically becomes the Sellers, much like the Due Diligence Fee. So there would be some "skin in the game" after Due Diligence Period. Any Seller should be willing to allow a Buyer time to inspect and see if there were any issues.

There are many different scenarios as to why one should or should not pay a Due Diligence Fee. Good real estate agents know the difference and variables. Both the Buyer and the Seller will need to consider what is in their best interests. They should also have an agent to help them see the pro's and con's. They need agents that are looking out for their best interests and helping each to garner an amicable deal.

There really is not right or wrong. You just need to find an agent that knows the difference and how this will best serve you. You are EXACTLY WRONG! This abomination makes it possible for a buyer to write a contract but HAVE NO SKIN IN THE GAME unless the seller requires a DD fee. Realtors in some locations are completely unaware of the issues with the DD clause with respect to the seller.

THIS IS NOT IN YOUR BEST INTEREST. Sellers should completely disregard the EARNEST MONEY DEPOSIT as it is worthless until AFTER the DD period has expired. Sellers should ask for a DD fee in the same amount as would be usual with an earnest money amount.

After the DD period, the seller should then require the DD fee be transferred to earnest money. We did finally get an inspection but the house was a fire trap and the roof shingles were not what they said they were.

They also played games with us especially when they knew they have a cash back up offer. Because with cash I'm told they don't need an inspection or an appraisal. We have both agreed that if our deal falls through this time we will never give earnest money again it's a rip off and it's in favor of the seller well they're selling their house they're going to get money anyway you're the one losing money by in the house you don't come out on top only they do because they could be doing this over and over and over again to people.

Imo, it is a bad deal. The seller is under no obligation to take the home off the market. If it were refundable due to the seller refusing to negotiate gross problems found during the due dilligence period, then fine. The commision just created another BAD deposit that screws buyers.

As a new buyer in the NC market I like the due diligence DD period to get appraisals completed. My financing institution requires their own appraisal, which I pay for , before they set a lending amount. My credit is excellent and the DD allows me the opportunity for the inspection and possible further negotiations regarding selling price or repairs that were unknown to me and not openly stated by the seller.

It isn't a matter of funding, but of learning the property that is so important to me. In law school a land sale contract was BINDING and it is very reasonable to have a DD period for buyers to learn the property they are about to buy.

Under the BINDING contract a person needed a lawyer BEFORE they entered into ANY agreement. Used properly both sides can be protected by use of the DD and forfeiture feature. The real estate agent told me the due diligence date no longer applies since the seller converted earnest money into due diligence fees. But the due diligence period is used for the buyer to get everything done like inspections and appraisals before the due diligence date is up, and plus the contract states that this is the period for buyer's to decide whether or not they want to terminate the contract or not with no reason at all.

So, how could the real estate agent tell me otherwise? As a result, it is basically out of normal market circulation. Yes, the seller can continue to market the home and show it, and agents do this. However, most buyers and their agents do not want to consider looking at a home that is "Under Contract," as the opportunities to purchase that home are slim to none. Yes, the offer may be withdrawn, not pass inspection, not qualify for loan, or any other number of reasons.

Back-up offers can be made. Still, your reasoning that it doesn't make since in the residential context lacks some merit. Some homes may have multiple offers. Sellers will look at several offers and try to consider which may be best for them and is most likely to close.

Individuals that are willing to put in a Due Diligence fee show their seriousness by being willing to lose money should they back out. From the Sellers stand point, this may be considered a more serious buyer, even though their offer may be less. The Seller may feel the Buyer is sure that everything will go through. As a result, the Seller may choose a Buyer that makes a lower offer, feeling confident this deal will move to close. After all, it's the closing that matters.

There are reasons for making a Due Diligence Fee. An experienced Broker will help the Buyer to see if this may or may not be so in their particular case.

Pelican View | Bluewater NC | Emerald Isle and Atlantic Beach Vacation Rentals

I have encouraged a couple of Buyers to include the Due Diligence Fee. This is not the norm. However, as has been stated so many times, a Due Diligence Fee is not required.

For what it's worth , you want a NCAR SF 2-T [Website removed by Zillow moderator. Please see our Good Neighbor Policy. No one mentioned here that the seller can continue to show and market their house until the end of the due diligence period, so the argument that the fee is to pay the seller for taking their home off the market is not correct.

The due diligence fee, if anything, is justified by inconveniencing the seller by having inspections done, etc. Certainly in commercial real estate, this can be a big deal, and in that context it makes sense. In a residential context, it does not make sense for the buyer to offer it.

It's the law that there had to be a due diligence period, so the buyer does not have to "pay for that right", because it's already a state law. The earnest money puts the "skin in the game". The due diligence fee is a bad idea for a buyer, save for if it's a very competitive market and you want to make your offer more appealing.

All you real estate agents who these simple fact were lost on, need to think about how well you're representing your clients. J Michael Persinger, "J Michael Persinger" Premier Agent 28 reviews. Due diligence is your gift to the seller to ask them to take the house off the market while you are deciding if you want to buy it it is a fee it is non refundable.

Anna Granger, "annagrangerhomes" Premier Agent 66 reviews. There is another reason for, "Due Diligence Fee. A buyer will need the power and water turned on to have the inspection done.

The seller will have to hire someone to do this.

Then after the inspection, pay to have it "re-winterized. In this situation, the Due Diligence Fee may only be enough to cover his expenses. The buyer puts the money up front to pay for those expenses. If they buyer continues to closing, this money is credited to the buyer. If not, then the seller is not out of pocket for these expenses.

Now, the question come, "But what if it doesn't pass inspection? That agent should not be trying to sell a home that may be overpriced. He should help his buyer client to see that. Also, before making an offer, the buyer should be getting a Residential Property Disclosure. Again, the buyers agent should be helping to secure this.

If the form is market, "No Representation," this should start to throw up some red flags. Due Diligence Fee is not required. It's not a "gift. A buyer should be ready to buy. The buyers agent should be representing the buyer and assisting in helping the buyer to see the value of the home. No all real estate agents are the same. Just like doctors and lawyers, you need to look around and make sure you are being represented.

The world already has too many pushy salespeople. Lexie Longstreet, "Savvy" Premier Agent 22 reviews. There are lots of answers here about what Due Diligence is Due Diligence is in no way a method for the seller to "make a little money". The seller is taking their home off the market and many times they are deciding between two or more offers. If they choose the offer with the higher due diligence fee, they are at least choosing a buyer that has more skin in the game. The buyer will be less likely to get cold feet over a running toilet, or a broken gutter.

As far as buyer's being afraid to pay a due diligence fee, you need to do some investigating before you write an offer. The NC Offer to Purchase and Contract is an "As is" contract. It clearly says you are purchasing the home in it's current condition. The seller is under no obligation to fix anything. So before you write an offer it would be advised that you do a little looking around. Look at the power box, the windows, look under the house, go in the basement, sniff around.

Look at the roof, look in the attic. Don't just look at the granite countertops and farm house sink. If you are nervous about the house before you write the offer I can guarantee you will be more nervous after you write the offer.

Inspectors will find lots of little stuff that needs fixing on even a brand new house. No house is perfect. Choose an agent that is creative in getting you what you want.

Perhaps you can split the Due Diligence fee up into different payments. Look for repairs you know you will ask for and put them in the contract from the start. Don't try and "surprise" the seller with expensive repair request.

Primarily, make sure you understand the contract before you sign it. As a buyer you have the option to walk away, so obviously the seller is going to want to be compensated for that "right" upfront.

Don't have Ashley Law firm do closing! Christina Norman, "7 Day A Week Realtor" Agent 1 review. The value to the buyer is that the Due Diligence money is paid to the seller for the right to walk away for any or no reason without any loss in Earnest Money as long as you terminate before the end of that negotiated Due Diligence Period.

And if no arrangement can be negotiated then the buyer can walk away for any or no reason and is not stuck with a home that "could" be considered loosely a "lemon". Some might say this has more value to the buyer than the seller as even if all the requested repairs are done by the end of the Due Diligence period the buyer can still terminate for any or no reason easily with written notice by the end of that time period.

Get a home inspection and a great Realtor before you go live on the market to help you prepare the property to prevent any pitfalls that could scare a potential buyer away from your otherwise fabulous home.

I have had a horrible experience with the due diligence part of the RE contract. First off, some of the home inspectors have taken online courses and they are now officially a home inspector.

Then they perform a home inspection on your property. The buyer gets a page report with knit picky problems or concerns. Pictures are taken of the sellers' homes problems. The seller then gets a DDRA from the interested buyer which they have to address or refuse to do. I had brand new windows installed by a very reputable company, in business for years. This so called home inspector found issues with my new windows and I had to get the company back out to reinspect their work.

The window company rebutted everything the home inspector found. And so it goes on I have talked to numerous sellers who are going thru the same thing.

The buyer can cancel at any time even up until the day of closing. This is entirely unfair to the seller. The seller has no rights; the buyer has the advantage. William Broyles, "wbroyles2" Lender 8 reviews. Basically the Due Diligence Fee is the fee that you pay the seller to take the house off the market while your loan in in processing. Even if your loan falls through or for any other reason you do not proceed with the transaction, the Due Diligence Fee is non-refundable.

Sometimes, however, sellers will refund the Due Diligence Fee on a case by case basis. Tbe easiest way to explain the Due Diligence Fee is simply this: The buyer can pull from the contract for any reason or no reason during the "due diligence period" However, be reminded that the Buyers Agency Agreement tells you that any services that you have had performed such as your inspection and appraisal, still have to be paid for.

Your Due Diligence period is valuable and precious time, use it wisely. On our contract it said nothing only had closing date and due diligent Date only what do we do now????? Related Questions Typically How much do Home inspections cost In Buying Process December 31 In Buying Process March 22 In Buying Process August 25 In Buying Process March 03 Related Articles Inspections During Escrow In Buying Process September 21 In Buying Process September 21 In Buying Process June 03 Be A Good Neighbor Zillow Advice depends on each member to keep it a safe, fun, and positive place.

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