Earnest money is a refundable deposit made to show a buyer's commitment, usually held in escrow and applied to the purchase price. Its amount varies from 1% to 3% of the purchase price and may be refundable based on contract contingencies. Due diligence refers to the period after the offer acceptance, allowing buyers to inspect and evaluate the property. This investigation ensures the property meets expectations and lender requirements, with due diligence fees typically being non-refundable payments made directly to the seller, helping secure the time needed for these evaluations.
Earnest money is a refundable deposit held in escrow to show serious intent to buy, while due diligence fees are typically non-refundable payments made to the seller.
Understanding the difference helps protect your investment and strengthens your position during negotiations.
Earnest money ranges from 1% to 3% of the purchase price, giving the seller confidence in the deal and discouraging the buyer from backing out without valid reasons.
The due diligence period allows the buyer to investigate the property to ensure it meets expectations and lender requirements.
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