When Is Due Diligence Money Due in NC?

In North Carolina real estate transactions, buyers encounter unique financial components. “Due diligence money” provides a defined period to thoroughly investigate a property. This empowers buyers to make informed decisions before committing to a purchase. Understanding this payment is important for anyone engaging in the North Carolina real estate market.

Defining Due Diligence Money

Due diligence money in North Carolina real estate is a direct payment from the buyer to the seller, separate from any earnest money deposit. Its primary purpose is to compensate the seller for removing their property from the market for a specified period. This payment grants the buyer an exclusive right to conduct inspections and investigations without another buyer securing the property.

This fee acknowledges the seller’s commitment to holding the property for the buyer’s investigative period. Unlike earnest money, which is typically held in an escrow account, due diligence money is paid directly to the seller. The amount is negotiable and can vary based on the property’s listing price, local market conditions, and the agreed-upon due diligence period.

Payment Timing for Due Diligence Money

Due diligence money is typically due upon the contract’s effective date, when both buyer and seller have signed and acceptance is communicated. Timely delivery of this fee activates the due diligence period, allowing the buyer to proceed with investigations. While ideally paid at contract execution, some agreements allow for delivery within a short timeframe, often 24 hours to a few days.

If the due diligence money is not delivered by the agreed-upon date, the buyer is in breach of contract. The seller must provide written notice, giving the buyer one banking day to deliver the funds. If the buyer fails to deliver the funds within this cure period, the seller has the right to terminate the contract with written notice. This ensures sellers are not left with their property off the market without compensation.

Implications of Due Diligence Money

Due diligence money is generally non-refundable. If the buyer terminates the contract for any reason during the agreed-upon due diligence period, the seller typically retains the due diligence money. This applies even if termination results from unfavorable inspection findings or a change of heart. The seller keeps this fee as compensation for the time the property was off the market and for the opportunity costs incurred.

If the real estate transaction proceeds to a successful closing, the due diligence money is credited to the buyer. This amount is applied toward the property’s purchase price. The primary function of due diligence money is to provide the buyer the contractual right to terminate the agreement during the investigative period, with the understanding that forfeiture of this fee is the consequence. This arrangement offers a defined risk for the buyer, allowing them to assess the property thoroughly before committing to the purchase.