By Elizabeth Putnam, Real Estate Broker | Mosaic Community Lifestyle Realty | Asheville & Western North Carolina
“Due diligence” may not sound like the fun part of buying a home, but understanding it can save you a lot of head-scratching later. It is one of the most important concepts to know before buying in North Carolina. Under the commonly used standard residential contract, it is your opportunity to investigate the property and transaction before deciding whether to proceed.
Three similar-sounding terms serve different purposes.
The Three Parts
| Term | What it means | Key point | | --- | --- | --- | | Due diligence fee | A negotiated fee, if any, paid to the seller | Generally nonrefundable if you choose to terminate; credited toward the purchase at closing | | Earnest money deposit | A negotiated deposit held by the designated escrow agent | Generally refundable if you properly terminate within the due diligence period; credited at closing | | Due diligence period | The negotiated time to investigate and decide | Your right to terminate for any reason must be exercised as the contract requires before the deadline |
The fee and earnest money amounts are negotiable. Neither has a universal required amount. Follow your contract's payment and notice requirements.
What Should You Investigate?
Think of this as your time to ask the questions behind the pretty listing photos. Use it to consider the whole transaction. Depending on the home, that can include inspections, insurance, access, restrictions, boundaries, title matters, financing, and appraisal.
In Western North Carolina, wells, septic systems, private roads, steep sites, and drainage may call for additional expertise. Start early so there is time to follow up on findings.
What If You Find a Problem?
We can ask the seller for repairs or concessions, but new requests require agreement. Finding a problem does not automatically make the fee refundable or require a repair. Any refund exception depends on the contract and circumstances; questions about seller breach need legal advice.
If you need more investigation time, an extension requires the seller's agreement and proper documentation. Repair discussions do not automatically extend the deadline.
Why Financing Progress Matters
The standard contract does not provide an automatic financing escape after due diligence. If financing fails later, your earnest money may be at risk. Review unresolved loan or appraisal issues with your lender and agent before deciding to continue.
My advice: Treat due diligence as a decision period for the entire purchase. Know what remains unanswered before it ends.
Questions before offering? Reach me at (828) 301-6374.
Related reading: Writing an Offer · Under Contract · Homebuying Overview
Additional resources: NCREC: Due Diligence Questions and Answers, Financing and Earnest Money, and When a Seller Breach May Affect a Refund.
- Homebuying Guide
