Do I Really Need To Give A Due Diligence Fee In North Carolina?
So many people relocating to North Carolina want to know if the due diligence fee is absolutely necessary in order to buy a house. This is an important question since it is non-refundable unless the seller breaches the contract. The answer is actually a little complicated. The quick & short answer: no. There is no law or rule which mandates that a buyer pay a due diligence fee to the seller. The Offer To Purchase And Contract has a line item for it and even has verbiage explaining what it is, but nothing in there states that it is obligatory.
Before I go on, if you are confused about what a Due Diligence Fee is and how it differs from an Earnest Money Deposit, check out my blog post that explains it here.
So Why Should I Even Give A Due Diligence Fee?
I gave you the short answer that the Due Diligence Fee (aka DD) isn’t mandatory, but the longer answer is much more complicated.
You see, before Covid, the DD fee was a lot less than it has become in recent times. People used to give $500 – $1,000 or so. A large DD fee may have been $2,000 – $5,000. Even then buyers were very reluctant to give it because it is non-refundable if the buyer walks away (even if the inspection report is bad or the house doesn’t appraise). The Earnest Money Deposit (aka EM) was a little more substantial but still not all that high.
The Covid era turned the Triangle area housing market upside down and shook it up like a snow globe. It became so competitive that buyers were offering between $10,000 to $100,000 in non-refundable DD fees just to win a home. Sellers then became aware of how valuable the DD fee was to them and it has become a staple in our area of North Carolina. When a seller receives an offer, they want to know 3 key facts right away: offer price, DD Fee amount and the closing date. When two competing offers are similar, the seller will often pick the one with the greater DD fee (since they get to keep it if the buyer walks away).
So why give the DD Fee? You give it to have a competitive edge.
Even houses that have been on the market for a while want a good amount of DD Fee to pay for the time the house is off the market for the buyer to do their inspections, appraisal, survey, etc.
Can’t I Just Skip The Due Diligence Fee?
Let me ask you this: is your goal to get a house? Do you want a house? Do you need a house?
If the answer to that is “yes”, then you will likely have to give some sort of DD fee in order to win the home.
The more popular the home, the more desirable the location, the better the condition that it is in… the more DD Fee it may take to win the home. It’s truly that simple.
Buyers who fight the DD Fee are often on the losing side of the battle.
You can always try to skip the DD Fee, but if you truly want a home, you will need to come to terms with this non-refundable money.
When Do I Give The Due Diligence Fee?
The good news is that you don’t have to hand over a check every single time you present an offer. You only write out a check for the DD Fee if the seller accepts your offer and you received a signed contract back. Once you receive the signed contract, the DD Fee money is due the day the contract is executed (or as soon as possible). You may be an out of state buyer and therefore will need to wire the fee or overnight a check. Some buyers and sellers agree on having large amounts wire transferred or as an official bank check.
So don’t panic… you’ll only give the DD Fee if your offer is accepted.
Will The Due Diligence Fee Ever Go Away?
So many people are wishing and hoping that this fee goes away. There have been talks about having more regulation around the DD Fee, but nothing concrete. For the foreseeable future, if you are buying a house in the Triangle area of North Carolina, then you can very much expect to give a DD Fee.
If you have any questions about the Due Diligence Fee or anything else related to real estate in North Carolina, then please send me a message so we can chat. My job is to educate you on the most important fact related to North Carolina real estate so you can be ready for what is ahead.
Learn More…
Click here to learn more about the Due Diligence Fee.
Click here to learn more about the Earnest Money Deposit.
Click here to learn more about the benefits of having a buyer’s agent.
Click here to learn more about the benefits of having a seller’s agent.
