Heard both “due diligence” and “earnest money” tossed around when writing an offer in Cary, but not sure how they differ? You are not alone. These two deposits do very different jobs in North Carolina, and mixing them up can cost you real money.
In this guide, you will learn what each payment means, how the timing works, what happens if a deal cancels, and how Cary’s competitive market shapes your strategy. You will also get simple checklists for buyers and sellers so you can move forward with confidence.
Let’s dive in.
Quick definitions you can trust
Due diligence fee
The due diligence fee is a negotiated amount you pay directly to the seller in exchange for time to investigate the property. You usually pay this at contract acceptance, and it is typically nonrefundable. If you close, it is commonly credited toward your purchase price.
Purpose: It compensates the seller for taking the home off the market while you inspect, review title, and secure financing.
Earnest money deposit
The earnest money deposit is your good faith deposit held in an escrow or trust account by an attorney, title company, or broker. It shows you intend to perform. If you close, it is credited to you at settlement.
Refundability: It may be refundable or forfeited based on contract contingencies and timing.
The core difference in one line
The due diligence fee is paid directly to the seller for your exclusive investigation period and is generally nonrefundable, while earnest money is escrowed as a performance deposit that may be refundable or forfeitable depending on contract terms and deadlines.
How these work in North Carolina
Standard contract framework
Most buyers and sellers in North Carolina use the statewide Offer to Purchase and Contract. It has separate sections for the due diligence fee and period, and for earnest money and escrow. You and the seller negotiate the fee amounts, who holds earnest money, the due diligence period length, and key contingencies like inspection, financing, appraisal, title, and survey.
Timing and typical amounts
- Due diligence period length is negotiable. In competitive markets, sellers often push for shorter periods, sometimes under 10 days. In slower conditions, buyers may secure more time.
- Due diligence fees vary widely. In popular suburbs like Cary, buyers often offer higher fees to strengthen an offer.
- Earnest money is commonly set as a flat amount or 1 to 3 percent of the price, but it varies by price point and competition.
- Payment timing matters. The due diligence fee is typically due at contract acceptance and paid to the seller or their attorney. Earnest money is delivered to the named escrow holder at acceptance or within a short number of business days, as defined in the contract.
Who holds the money and how it is applied
- Due diligence fee is paid to the seller and usually becomes the seller’s money when paid. If you close, it is typically credited to the price.
- Earnest money sits in escrow. If the transaction closes, it is credited to you. If you cancel within your contract rights, it is generally returned to you. If you breach after your rights expire, the seller can seek the earnest money and possibly other remedies per the contract.
How contingencies interact with deposits
- Inspection happens during the due diligence period. You can request repairs or cancel for any reason within that period. The seller keeps the due diligence fee if you cancel.
- Financing and appraisal contingencies are separate. If your contract includes them and you follow deadlines, they can protect your earnest money if you cannot obtain the loan or the appraisal comes in low. If those rights are not in the contract or if you miss a deadline, your earnest money is at risk.
- Title and survey issues are addressed by contract language and deadlines as well.
What happens in common scenarios
You terminate during due diligence
If you cancel within the due diligence period, you can do so for any reason. Your earnest money is generally returned. The seller keeps the due diligence fee, unless your contract says otherwise.
You terminate after due diligence ends
If you cancel after the due diligence period and do not have another valid termination right, your earnest money can be forfeited to the seller. The seller already has the due diligence fee. Release of funds follows the contract’s default and remedies section, often requiring a mutual release.
Financing denial or low appraisal
If your contract has a financing or appraisal contingency and you meet the notice deadlines, you may terminate and recover earnest money. If those protections are not included or deadlines are missed, you could lose your earnest money.
Seller breach
If the seller refuses to perform or cannot convey as agreed, you may be entitled to the return of your earnest money and other remedies. Some buyers pursue specific performance or damages depending on the facts and contract language.
Disputes over earnest money release
If buyer and seller disagree over who gets the earnest money, the escrow holder usually keeps it in the trust account until there is a mutual release or a court directive. This can extend timelines, so clear documentation and prompt notices are key.
Deadlines and documentation
Put every notice in writing and track dates closely. Missing a deadline can change who keeps the earnest money or whether you can terminate.
Cary and Wake County realities
A competitive, fast-moving market
Cary sits within the Raleigh-Durham area and has seen strong demand at times. In multiple-offer situations, sellers often prefer larger due diligence fees, shorter due diligence periods, and solid earnest money. In a slower stretch, buyers can negotiate more time and smaller deposits.
What this means for you:
- As a buyer, a higher due diligence fee and shorter due diligence period can make your offer stand out. Only offer what you are comfortable risking.
- As a seller, you can use the due diligence period length and fee size to gauge commitment and reduce risk of a late termination.
Local closing practices
Many Wake County deals use a local closing attorney or title company to hold earnest money and close the transaction. The Wake County Register of Deeds records the deed after closing. You will coordinate escrow delivery instructions early so there is no delay on day one.
Local due diligence priorities
- Schedule inspections right away. Termite and wood rot checks are common, especially in older homes. Roof, HVAC, foundation, and drainage are frequent focus areas.
- Review HOA rules if applicable. Understand community restrictions, fees, and approval processes.
- Confirm Wake County tax proration and check for any outstanding property taxes. Your closing attorney or title company can help confirm these details.
Use local professionals
In Cary, it is common to work with a licensed North Carolina real estate broker for offer strategy and a local closing attorney or title company for escrow and title review. Inspectors familiar with local construction can help you prioritize findings that matter in our climate and market.
How to choose your deposit strategy in Cary
Picking a due diligence fee
- Weigh competitiveness and risk. Higher fees signal commitment. Only offer what you can afford to lose if you cancel.
- Match the market. In a hot segment, a modest fee may not stand out. In a softer segment, a smaller fee can still work.
- Coordinate with timing. A shorter due diligence period can pair with a moderate fee to balance risk and strength.
Setting earnest money
- Use a clear, round number or a simple percent of price. Many offers land in the 1 to 3 percent range in various markets, but choose what aligns with your comfort and competitiveness.
- Confirm deadlines. Nail down when funds are due to escrow and who holds them.
Time your inspections and loan steps
- Order inspections on day one. Build in time for follow-up opinions if needed.
- Lock in your lender milestones early to hit financing and appraisal deadlines.
Buyer checklist
- Decide on your due diligence period length and a fee you can risk.
- Choose an earnest money amount and confirm the escrow holder and delivery deadline.
- Make sure the contract clearly states how the due diligence fee and earnest money are credited at closing.
- Schedule inspection(s) immediately after acceptance and document all findings and requests in writing.
- Track every deadline for inspections, financing, appraisal, and title notices.
- Understand all contingencies in your contract and what they protect.
Seller checklist
- Set a due diligence period that fits market speed. In multiple offers, consider shorter periods and higher fees.
- Require an earnest money amount that discourages casual cancellations and confirm escrow instructions.
- Work with your agent and, if needed, an attorney to understand what counts as a breach and what remedies the contract allows.
- Keep communication open for inspection access and respond to repair requests within agreed timelines.
Avoidable mistakes that cost money
- Confusing the two deposits. Remember: due diligence fee usually stays with the seller if you cancel within the period. Earnest money depends on contingencies and timing.
- Waiting to schedule inspections. Delays can push you up against the due diligence deadline.
- Missing a financing or appraisal notice date. That can put your earnest money at risk.
- Vague escrow details. The contract should clearly name the escrow holder and timing for deposit.
- Assuming a low appraisal automatically ends the contract. That depends on the exact wording in your agreement.
A smoother path with local guidance
You deserve a straightforward plan that protects your money and supports your goals. A local team can help you set the right due diligence fee, time the due diligence period, and structure earnest money so your offer is strong without taking on more risk than you intend.
If you are buying or selling in Cary or across Wake County, our team can walk you through the details, track deadlines, and coordinate with your closing attorney and inspectors so nothing slips through the cracks. Ready to talk through your next move? Connect with Hendren Realty Group to get started and request a free home consultation and valuation.
FAQs
What is the difference between due diligence and earnest money in North Carolina?
- The due diligence fee is paid to the seller for your investigation period and is generally nonrefundable, while earnest money is held in escrow and may be refundable or forfeited based on contract terms and timing.
In Cary, when is the due diligence fee paid and is it credited at closing?
- It is typically paid at contract acceptance directly to the seller or their attorney, and it is commonly credited toward your purchase price at closing.
Do I get my earnest money back if I cancel during the due diligence period?
- Yes. If you terminate within the due diligence period per the contract, your earnest money is generally returned, and the seller keeps the due diligence fee.
Can the seller keep both the due diligence fee and my earnest money?
- It depends on timing and contract language. If you cancel during due diligence, the seller keeps the due diligence fee but your earnest money is usually returned. If you breach after your termination rights expire, the seller may seek the earnest money and potentially other remedies.
How much earnest money is typical in Cary?
- Amounts vary by price point and competition. Many markets see 1 to 3 percent as a common range, but the right number depends on your strategy and current market conditions.
What happens if financing falls through after due diligence ends?
- If your contract includes a financing contingency and you meet its deadlines, you may be able to terminate and recover your earnest money. Without that protection or if deadlines are missed, your earnest money could be at risk.
Who usually holds earnest money in Wake County?
- A closing attorney, title company, or a broker’s trust account commonly holds earnest money. Your contract will specify the holder and delivery timing.
