What Buyers and Sellers in North Carolina Need to Know About Due Diligence
Last updated 11/28/19
Buying or selling a home is a major life event, and you want to feel confident that you’ve had time to thoroughly understand any transaction you decide to make.
What is due diligence?
North Carolina homebuyers have a period of time during which they can fully investigate a property (and the financing process associated with the transaction) and decide whether or not to proceed with the home purchase.
Sellers, meanwhile, can be compensated for the period of time the buyer needs for their due diligence period.
The Offer to Purchase and Contract allows for a negotiated, non-refundable “due diligence fee” to be paid by the buyer, directly to the seller, in exchange for the amount of time associated with the due diligence period. During this period, and at the seller’s discretion, their property may remain available for showings and back-up offers and contracts.
This fee could be in addition to an earnest money deposit, which is treated separately in the Offer to Purchase and Contract. While due diligence is non refundable, the fee will serve as a credit to the buyer should they complete the purchase.
With due diligence, a buyer and seller agrees upon a period of time during which the buyer can research a potential purchase.
During a negotiated due diligence period of time, the buyer must complete all of the inspections, surveys, and appraisals typically performed by a diligent buyer.
In addition, the buyer needs to be satisfied with the documents governing the home; the availability and affordability of insurance for the home; and their own ability to be approved for a mortgage.
What happens if the buyer wants to back out of the purchase?
If the buyer is not satisfied with the investigation – or if they simply change their mind about completing the purchase, the buyer may unilaterally terminate the contract and be entitled to a return of their earnest money deposit, assuming notice of termination is delivered to the seller prior to the expiration of the due diligence period.
After that expiration date, the buyer loses their ability to terminate the contract and receive a refund of the earnest money deposit (except in the case of the seller’s breach) and the power of the contract shifts to the seller.