When an offer to purchase a home is made, there are two important dates and checks that will accompany the offer:
DATE #1 Due Diligence: This is the time frame in which the buyer does all of their investigations concerning the property, including home inspections and loan processing. During this time the buyer may cancel the contract for any or no reason at all. Again, a buyer may cancel at anytime for any reason during the due diligence period. The cancellation does not have to pertain to an inspection, loan, appraisal, or other obvious problem. A more competitive offer may have a very short or no due diligence period. If you know you'll have a lot of inspections to complete and in turn a lot of repairs, due diligence will be around 4 weeks.
DATE #2 Closing Day: Everything in North Carolina contracts are negotiable including the closing date. Usually we will see closing happening shortly after the due diligence period ends, about a week or two, since all inspections and potential repairs are complete the path to closing is clear. Closing is always negotiable and can create a more competitive offer the shorter amount of time until closing.
Now, the money talk...
There are two checks you'll talk about with your agent as well. In the Triangle area of North Carolina you will see typical numbers laid out below.
CHECK #1 Due Diligence: Depending on competition and other offer components, this will range anywhere from $500 - $2,000 (maybe more in a highly competitive situation). This check is made out to the sellers and is essentially the amount of money the seller is being paid to take their home off the market. Since the buyer will typically ask about 4 weeks for the due diligence period in the contract, that is four weeks the seller is locked in but the buyer can walk away for any reason at all. If the buyer decides to walk before the due diligence period is over, the seller gets to keep the due diligence money. If the contract goes all the way to closing, the due diligence money is credited back to the buyer as part of the down payment.
CHECK #2 Earnest Money: In this market, the earnest money deposit floats around about 1% of the purchase price. Earnest money is held in an escrow account until closing and is used as a way to "put your money where your mouth is" to show how serious you are about the purchase. Earnest money exists on a spectrum, some sellers will put a lot of emphasis on it and others may not care too much about it because their focus is more on due diligence. If a buyer backs out of the contract during the due diligence period they will receive their earnest money check back.
The only way a buyer can lose both the due diligence AND earnest money is if the contract is cancelled after the due diligence period. That’s considered a breach of contract, and the buyer would receive neither of those deposits back.
When you’re interviewing prospective Realtors, talk to them about the due diligence process and what it means for you, because it’s different when looked at through a buyer’s eyes and a seller’s eyes.