When buying a home in North Carolina, you’ll encounter two types of deposits: the Due Diligence Deposit and the Earnest Money Deposit. While both play important roles in the offer and closing process, they serve different legal and strategic purposes—and understanding the difference could save you thousands.

Quick Answer: What Are Due Diligence and Earnest Money Deposits?

In North Carolina real estate transactions:

• Due Diligence Deposit is a non-refundable payment made directly to the seller, granting the buyer the exclusive right to investigate the property and cancel the contract for any reason during the due diligence period.
• Earnest Money Deposit is a refundable payment held in escrow to show the buyer’s seriousness and is typically credited toward the purchase at closing.

---

Why Does North Carolina Have Two Deposits?

North Carolina uses a “due diligence” system rather than a “contingency-based” model like many other states. This system promotes transparency and reduces legal disputes by encouraging upfront investigation. It also allows the buyer flexibility to back out for any reason—while compensating the seller for the time the property is off-market.

---

1. Due Diligence Deposit: The Buyer’s Option Fee

What It Is:

A negotiated, non-refundable fee paid directly to the seller at contract signing. The buyer gets the unrestricted right to cancel the deal for any reason before the due diligence deadline.

Typical Amount:

Varies by market. In competitive markets, due diligence can range from 0.25% to 2% of the purchase price or more.

Key Features:

• Paid to seller directly
• Non-refundable unless seller breaches contract
• Credited toward purchase at closing
• Provides time for inspections, financing, appraisals, and title review

Best Practices:

• Hire a licensed home inspector and review findings promptly
• Submit repair requests well before the due diligence deadline
• Understand that walking away after the deadline means losing both deposits

---

2. Earnest Money Deposit: The Escrow Signal

What It Is:

A second deposit paid to a third-party escrow agent (typically the closing attorney or real estate firm). It’s refundable if the buyer terminates within the due diligence period.

Typical Amount:

Usually 1% of the purchase price, though negotiable.

Key Features:

• Held in trust (escrow)
• Fully refundable if the buyer cancels within due diligence
• Credited to buyer at closing
• Can be disputed if cancellation occurs outside the allowed timeframe

Common Misconceptions:

Many buyers assume both deposits are refundable—they are not. Only the Earnest Money Deposit is potentially refundable, and only if the contract is terminated on time.

---

Timeline Overview: Deposits and Deadlines

Stage	Action	Deposit Status
Contract Signed	Buyer pays both deposits	Due Diligence goes to seller; Earnest held in escrow
During Due Diligence Period	Buyer investigates property	Buyer may cancel for any reason
End of Due Diligence Period	Buyer commits or cancels	Earnest refunded only if canceled on time
Closing	Sale finalizes	Both deposits credited to purchase

---

FAQs About NC Real Estate Deposits

Can I get my due diligence deposit back?

Only if the seller breaches the contract. Otherwise, it’s forfeited if the buyer walks away.

Can I cancel after the due diligence period?

Yes—but you risk losing both deposits.

Who holds the deposits?

• Due Diligence: Seller
• Earnest Money: Escrow agent (attorney or brokerage trust account)

---

Tips for Buyers in North Carolina

• Negotiate wisely: Due diligence is leverage—don’t overpay unless you’re confident.
• Act quickly: Inspections, surveys, and financing should be tackled early.
• Work with a local pro: North Carolina’s dual-deposit system is unique; an experienced agent will protect your interests.

---

Conclusion

Buying real estate in North Carolina means understanding both Due Diligence and Earnest Money Deposits. They’re more than just fees—they’re powerful legal tools that define your rights, risks, and responsibilities in the home buying journey.

Before making any deposit, consult with a North Carolina-licensed real estate agent or attorney to understand your obligations and options.

---

CTA: Thinking about buying a home in North Carolina? Connect with a local real estate expert at Varga Mountain Collective for guidance through every step—from deposit to closing.