Here’s a brief summary of due diligence fees, due diligence periods, and more.
In this dynamic, fast-paced seller’s market, we’re seeing extremely high due diligence fees and short due diligence periods. That’s why it’s important for buyers and sellers to understand how they each work.
Due diligence fees are paid to the seller by the buyer immediately after a contract is executed. This fee can be made by check, certified check, wire transfer, or digital payments such as Venmo or Zelle. This fee is nonrefundable unless the seller has a material breach of contract.
Both the due diligence fee and the due diligence period expiration are stipulated in the contract and fully negotiable. The due diligence period is the period of time where you will have inspections done, ask for certain repairs, get an appraisal, and make sure your loan goes through properly. The key fact to remember is that the buyer has the right to terminate the contract for any reason during the due diligence period. You will forfeit your fee if you back out, but you won’t have to buy the home.
Another fee that you may have heard about is earnest money. It’s paid by the buyer and usually held in a trust account until closing. This fee only comes into play if the buyer terminates the contract after the due diligence period has expired. This fee would then go to the seller, and both will be applied toward the purchase price at closing.
If you have any questions about due diligence, buying a home, or real estate in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.
