Ever heard about North Carolina’s due diligence fee and wondered why buyers pay money before inspections even start? If you are buying in Charlotte or moving from South Carolina, this can feel unfamiliar. You want to protect your budget and make smart decisions without surprises. In this guide, you will learn what the due diligence fee is, how it works in Mecklenburg County, how it compares to South Carolina, and practical steps to keep your offer strong and your risk clear. Let’s dive in.
What the due diligence fee is
The due diligence fee is a payment you, the buyer, make to the seller when your offer is accepted. In return, you get the right to terminate the contract for any reason during the Due Diligence Period stated in your contract.
This fee is different from earnest money:
- The due diligence fee is paid to the seller. It is usually non-refundable if you terminate during the Due Diligence Period.
- Earnest money is deposited in escrow with a closing or settlement attorney or another permitted escrow agent. If you terminate properly during the Due Diligence Period, earnest money is usually refunded to you.
If you close, the due diligence fee is typically credited back to you at closing and applied to your purchase price.
How it works in Charlotte
In Mecklenburg County, you and the seller negotiate both the fee amount and the length of the Due Diligence Period. The contract spells out when the period begins and ends. Your unconditional right to walk away ends at the Due Diligence Period deadline.
Local practice points:
- Most Charlotte-area transactions close with a real estate attorney. Earnest money is commonly held in the attorney’s escrow account.
- The due diligence fee is usually paid directly to the seller based on the contract timeline. Keep proof of payment.
- If the deal closes, expect the due diligence fee to appear as a credit on your Closing Disclosure.
What happens if you terminate
During the Due Diligence Period you can terminate for any reason by following the notice rules in the contract.
- If you terminate during the Due Diligence Period: the seller keeps the due diligence fee, and you typically receive your earnest money back from escrow.
- If you close: the due diligence fee is credited toward your purchase price.
- If the seller breaches: outcomes depend on contract language and the facts. A real estate attorney can advise on possible remedies, which may include recovery of funds.
North Carolina vs South Carolina
North Carolina commonly uses a Due Diligence Period plus a separate due diligence fee paid to the seller. This structure is built into widely used NC offer forms and closing practices.
In South Carolina, many contracts rely on earnest money and contingencies. Some SC markets and contracts may include their own version of a due diligence or option fee, but it is not universal. If you are relocating from SC, focus on the exact forms used in your target area. In NC, plan to negotiate both the fee and the period up front.
How much and how long
There is no fixed rule. You negotiate the fee and the timeline with the seller. In competitive Charlotte neighborhoods, sellers may favor higher due diligence fees or shorter periods. In slower conditions, buyers often secure longer periods and lower fees.
When setting the Due Diligence Period, consider:
- Inspection scheduling and any specialists you may need
- Appraisal and lender milestones
- HOA document delivery and review times
- Time to price repairs, seek credits, or adjust terms
Buyer checklist: protect your position
Use this quick checklist to stay organized and reduce risk:
- Negotiate both the fee amount and the period length together based on market conditions and your risk tolerance.
- Confirm in writing that the due diligence fee will be credited to you at closing.
- Clarify where earnest money will be deposited and get proof of deposit.
- Pay the due diligence fee on time and keep a receipt.
- Schedule home inspections immediately and plan for follow-up specialists if needed.
- Review HOA documents, title, and insurance estimates early in the period.
- Coordinate with your lender on appraisal and underwriting timelines.
- Put repair requests and any agreed credits in writing before the deadline.
- Track the termination deadline on your calendar and set reminders.
- Ask a closing attorney to review any unclear terms or disputes.
Real-world examples
- Example A: You offer $350,000 with a $2,500 due diligence fee, $5,000 earnest money, and a 14-day period. You terminate on day 10. Result: the seller keeps the $2,500 fee, and you receive the $5,000 earnest money back from escrow.
- Example B: Same terms, but you proceed to closing. Result: the $2,500 due diligence fee is credited to you on the closing statement and reduces your cash to close.
Taxes at a glance
When a sale closes, the due diligence fee is typically treated as part of the overall sale proceeds. If it is credited, it reduces the cash you bring to closing. For specific tax treatment, consult a qualified tax professional.
Your next step in Charlotte
Understanding the due diligence fee helps you write a stronger offer and make confident choices during the investigation period. If you are buying in Charlotte or comparing NC and SC processes, you deserve a disciplined plan, clear timelines, and a steady advocate by your side. Connect with Trenette Tucker to align your offer strategy, map your due diligence calendar, and move forward with confidence.
FAQs
Is the due diligence fee refundable in NC?
- Generally no. If you terminate during the Due Diligence Period under your contract right, the seller keeps the due diligence fee, and your earnest money is usually returned from escrow.
Who holds the due diligence fee in Charlotte?
- The fee is typically paid directly to the seller as the contract specifies. Earnest money is commonly held in escrow by the closing attorney or another authorized escrow agent.
Can I negotiate the fee and the period length?
- Yes. Both are negotiated in your offer. Competitive markets often push for higher fees and shorter periods, while slower markets allow more time and lower fees.
What if I terminate after the Due Diligence Period?
- Terminating after the period can trigger seller remedies under the contract, which may include keeping your earnest money or seeking other remedies. Ask a real estate attorney for guidance.
How do I budget for the due diligence fee?
- Plan to pay the fee soon after acceptance per the contract timeline, then expect it to be credited at closing if you proceed. Keep receipts and track deadlines.
What if the seller will not fix issues I find?
- During the Due Diligence Period you can negotiate repairs, request credits, or terminate. After the period, your options narrow to what the contract allows.
