Due diligence money is given to the seller by the buyer to put a home for sale under contract for the buyer. It is considered compensation to the seller for potentially missing out on another interested buyer while the home is under contract. The due diligence fee is given for the buyer to have time to do their ‘due diligence’ which may include inspections (home, pest, septic), property survey, appraisal, title search, loan qualification and approval and repair negotiation.  During the due diligence time the buyer can cancel the contract for any reason, or no reason at all. Due diligence money is non-refundable. The good news though is that the due diligence money is credited towards the purchase of the home at closing.

Earnest money is “good faith” money. The buyer is showing the seller they are serious about buying the home. If the seller is unable to fulfill the contract the buyer will get the earnest money back. If the buyer is unable to fulfill the contract the seller can keep the earnest money. Earnest money is refundable if the contract is cancelled within the due diligence period and is credited toward the purchase at closing if the sale goes through.

There is no definite amount set for due diligence or earnest money. Both the earnest money and due diligence fee paid will be negotiated between the buyer and seller and written into the contract.

So how much should you offer, and how long should the due diligence period be? It depends. There is no right or wrong offer. Your real estate agent can guide you based on what is typical for that neighborhood, home price and current market conditions. Just know that the smart seller will push for more money and a shorter period. Your real estate agent will push for less money and a longer period. The final amount and time will fall somewhere in the middle.