Buyers moving from other states are often surprised by the due diligence fee. It is a payment made directly to the seller in exchange for the right to terminate the contract for any reason during the due diligence period.
Due diligence fee versus earnest money
- Due diligence fee: paid to the seller, generally non-refundable, credited to the buyer at closing.
- Earnest money: held in escrow, generally refundable if the buyer terminates before the due diligence deadline.
Is the fee ever returned?
Generally, only if the seller breaches the contract or the deal fails for specific reasons in the contract. Have your attorney review your situation if a dispute comes up.
How much to offer
There is no standard amount. It depends on the price range, competition and how certain you are about the house. A higher fee signals commitment, but it is money you put at risk. Decide on the amount you could lose without regret, and offer within that.