Due Diligence & Earnest Money Processes in North Carolina

Earnest money and due diligence fees can be a confusing subject for new and first time home buyers. Before you can purchase a new home, you need to obtain a loan pre-approval, search and view prospective properties, make an offer, and most importantly do your own due diligence.

Navigating the world of real estate in the weeks before closing can be difficult. During your due diligence period, you secure your financing (if necessary) and make sure you are comfortable with the property. The process is an opportunity for homebuyers to do their research and make sure the property is as good as it appears to be. That includes planning for inspections and negotiating repair requests before moving forward with your offer.

Let’s take a quick dive into diligence periods and earnest money processes, what they are, and how they work to provide clarity for first-time home buyers in North Carolina.

Steps In The Due Diligence Process

As soon as you have made an offer and are “under contract” on the property, your Realtor can guide you through the steps of the due diligence process. The due diligence time period lasts around 21 to 30 days after an offer is accepted.Doing your due diligence with an experienced, locally connected real estate agent can give you peace of mind in your new purchase.

When you are considering due diligence process coverage on your High Country home, here are some process steps to be aware of.

#1: Choose A Due Diligence Money Process

North Carolina law allows both earnest money and due diligence money to be negotiated during the home buying process. Neither process is mandatory in North Carolina, but most contracts will negotiate to include both to protect the best interests of the seller. Here’s a little more background to help you decide if earnest money, due diligence money, or both is best for your transaction.

Earnest Money

Earnest money​ is a good faith deposit, essentially used to communicate to the seller that “you are willing to put your money where your mouth is“. When you decide that you would like to make an offer on a property, you will present an offer to purchase. This offer will designate the terms that you are offering the seller for the purchase of their home.

To demonstrate that you intend to complete the transaction in earnest or with good faith, it is customary to include an earnest money deposit in North Carolina. The amount varies from case to case, usually dictated by the competitiveness of the market you are in or a negotiated percentage of the contract price.

Payment is delivered to the closing attorney within the first few days of the due diligence process and kept in a trust or escrow account. These funds are credited toward the purchase price at closing.

Due Diligence Money​

Due diligence money compensates sellers for taking their house off market and potentially missing another buyer.Some sellers may require a due diligence fee to ensure they will receive enough funds if the home does not make it to closing.

Due diligence fees are paid upfront, about twenty four hours after an offer is accepted. The payment keeps people from making offers and signing contracts they are not serious about. 

In North Carolina, due diligence periods typically last anywhere from fourteen to thirty days. During the due diligence period, the buyer gets time to negotiate repairs, home owner association agreements, and review home inspection reports without the pressure of other buyers.

Due diligence money is credited towards the purchase price at closing unless the buyer decides to terminate the contract, in which case it is non-refundable.

#2: Consider A Closing Attorney​

Often times during the due diligence period, buyers chose a closing attorney to manage their Escrow and Earnest money. Closing attorneys are responsible for title searches and deed preparation during the due diligence period.  All closing documents will be signed with this attorney at the end of the contract.

#3: Obtain A North Carolina Home Inspection

The most common inspection during the due diligence period is the home inspection. Inspections should be done by a licensed and insured North Carolina home inspector. Home inspectors are trained to test and inspect all systems and structures on the property.

After the inspection, you will receive a multipage report that alerts to any possible issues with the home. This report helps the buyer make an informed decision about moving forward on the purchase, negotiating repairs, or requesting credits for the property purchase.

Other common inspections important to consider during due diligence are: water and well tests, if water source is from wells or spring water; septic system inspections, if served by a private septic tank; Radon tests; and pest inspections.

#4: Review Restrictions & Check Zoning

Many properties are in subdivisions and are governed by restrictions and covenants. This needs to be reviewed during the due diligence process to make sure you can use your new home how you would like. There is also county zoning that can affect the usage of the property, especially when considering renting or developing.

#5: Get Your Home Insured

Acquiring home insurance for your new home is essential to doing your due diligence. The due diligence process allows time for an insurance company and policy to be selected and prepared. Insurance agents will review zoning, flood zoning, property use (IE:Vacation Home, Primary Home, Rental Investment) to make sure you are covered with the correct product.


While having your home insured you may want to have a survey done. Surveys ensure that lot lines are accurate and that the buyer’s new purchase is protected.

#6: Have Your Home Appraised

Having your home appraised is an important step in the due diligence process as it ensures that you are not overpaying for the property in its current sate. If you are is getting a mortgage, an appraisal will be required by the lender. Appraisals will be scheduled and performed during due diligence period to assure the bank and the buyer that the price of the home is appropriate. If you are getting a government backed loan (USDA, FHA, VA loan- there will be a more in depth appraisal performed that must meet certain standards)

#7: Check for USTs

An often overlooked step in the due diligence process, it is detrimental that you check your property for an underground storage tank (UST). Depending on the tank and fuel source, UST’s can cause issues with water & soil quality if contents leak out of the tank. Have the soil on your property tested for any issues remedied prior to closing.

#8: Renegotiate, Renegotiate, Renegotiate

After the inspections are complete, any discoveries made and their estimates, are presented. Your Real Estate agent can help the buyer renegotiate the purchase price of the home and help you get the best outcome possible.

Frequently Asked Questions About Due Diligence Periods

Due diligence process comes with a lot of frequently asked questions as it is one of the most important phases of any real estate transaction. Here are a couple of common questions our Realtors get asked before closing on property in the High Country of North Carolina.

Are Due Diligence Fees Refundable?

If you decide to break your contract during your due diligence period, you will not be refunded your due diligence fee. The only way that a buyer can be refunded their due diligence fee is if the seller “materially breaches the contract,” which is rare according to the North Carolina Real Estate Commission.

The deposit is fully refundable if you decide not to buy the property, as long as this termination is done within the due diligence period. If you do close on the property, the earnest money is applied to the purchase price.

You still can break the contract for any or no reason at all. Just remember to be serious about the offers and contracts you do make!

How long does the due diligence time period last?

As soon as you make an offer and are “under contract” on the property of your dreams, your Realtor can guide you through the due diligence process. The due diligence time period lasts around 21 to 30 days after an offer is accepted.

How much money do I need for due diligence?

The amount you offer for due diligence also widely varies and is something you’ll want to discuss with your agent. If it is a property you feel good about making it to closing and it is a competitive situation, you may consider a higher due diligence fee than on a property that you anticipate having issues. This deposit will be given directly to the seller.

Get Guidance on the NC Due Diligence Period

In short, your due diligence fee should be an amount you’re willing to risk while inspecting the property on which you’re making an offer and your earnest money will vary depending on how strongly you want to impress the seller with the seriousness of your offer. 

The due diligence process has multiple steps that are very involved. Working with a North Carolina Real Estate professional who can facilitate all of the steps in the due diligence process, can make all the difference in securing your dream property and protecting you as you negotiate your purchase.

If you’re looking for a North Carolina Realtor to guide you through these processes, check out our blog that gives you 4 things to look for in a real estate agent.

About the Author

I have lived in North Carolina my whole life, 20+ years in the High Country.  I grew up in Chapel Hill with a huge extended family. Naturally, I am a huge UNC fan.  Although my whole family lived in Chapel Hill, the majority of them are Appalachian State graduates. So, when it was time to pick a college, I knew Boone was the place for me.  I came to the mountains because, as my parents had always told me, it is an absolutely beautiful place and the people are so down to earth! That was 1997 and I have lived here ever since.  I met my husband Dave at ASU and we married in 2001.  We have 3 children, Elias, Faith, and Penelope.  Our family lives in Downtown Boone. Dave teaches middle school science at Valle Crucis Elementary School. Before becoming a Real Estate Agent,  I spent 5 years as the co-teacher of the 9-12 year old class at Mountain Pathways Montessori School.  We are elders at our church, Harvest House, where I have taught preschool for the last 20 years.  I can't believe it been that long.... time flies when you’re having fun!  I met Sarah Long, 828 Real Estate's Broker/ Owner, in 1997.  My interest in Real Estate developed when we bought our first home and has grown as we have bought and sold over the years.  Sarah was our Realtor for years and suggested many times that I pursue Real Estate as a full time career.   I am so glad I did.  I am enjoying introducing others to the place I love and call home….I look forward to helping you find your perfect place!