Earnest Money vs Due Diligence Fee

In this episode of Whiteboard Wednesdays, we’ll compare two commonly confused elements of real estate sales: Earnest Money vs Due Diligence Fee.  What does each of these terms mean? How are they similar, and how are they different? To find out, read on!

Earnest money deposits and due diligence fees serve a similar purpose in the sale of a home, but are distinct from one another in two important ways – who they are paid to, and whether they are refundable.

An earnest money deposit is paid to an escrow agent, and remains in trust until the day of closing.  At this point, it is applied to the purchase price of the home. If the sale should not continue for whatever reason, the EMD is refundable until the expiration of the due diligence period.

A due diligence fee, on the other hand, is paid directly to the seller.  If is non-refundable, regardless of what happens during the due diligence period, even in the buyer chooses not to continue the purchase, and even if their change of heart is the result of negative findings during the home inspection.  The DD fee can be thought of as a fee for the opportunity to view a property, and its use is an increasingly common practice in sellers’ markets such as Asheville, where sellers can afford to exert more control over the process.
Whether you’re a buyer being asked to pay an EMD or DD fee or a seller asking a buyer for one or the other, it’s important to understand the distinctions and specifics of each.  To learn more, contact Asheville Cash Buyers by phone at 828-222-6443, or online at www.AshevilleCashBuyers.com!