When you attempt to buy real estate in Asheville, there is more to negotiate than just the selling price. You also have to agree on more than one date, how the property will be paid for, what is to be conveyed with the real estate, any repairs that are to be done before closing, etc etc. Among the most common questions we are asked at this point of the process is:
"What is the difference between due diligence money and earnest money, and will I get them back?"
This is very important to understand when crafting an offer on a home in Asheville, or anywhere in North Carolina. The standard form 2-T, Offer to Purchase and Contract doesn't do any favors with explanation. So, here's what you should know:
"Due Diligence Fee"
The most correct name for this amount of money is the Due Diligence Fee. This is important to understand because a fee is typically non refundable, as is the DD money. When you enter into a contract, you can expect to make out a check to the seller (not their attorney or their REALTOR), as a token of payment for taking their house off the market. If you decide that this house is not for you, that money will remain with the Sellers. If you close on the house, that money is included in your down payment.
"Earnest Money Deposit"
Just as the word "deposit" might suggest, this money can be refunded under the right conditions. The earnest money deposit is meant to be a show of good faith that you intend to purchase the house, assuming it's everything that the initial showing made it out to be. Instead of being a check written to the sellers, personally, this money goes straight into a trust account (typically the closing attorney) and can only be released upon completion of contract or a mutually agreed upon termination and release of money. When you negotiate the terms of your purchase, you will set a Due Diligence Date and a closing date. As long as you decide you want out of the contract before 5pm on the set Due Diligence date, the Earnest Money will be given back to you. So, make sure you know when this date is!
So, How Much Due Diligence and Earnest Money Should I Offer?
Every deal is different, and every seller is going to have different expectations on how much money they want. If you have a good agent, they should be able to guide you after feeling out the sellers agent. If not, you should know that a strong offer is going to include a decent amount of both. Obviously, if you have any doubts that the deal will go through, be sure not to overextend that DD money. I typically suggest $500 or $1000 if there is no indication of what the seller wants. The EMD seems to be most effective if it is AT LEAST 1% of the selling price. So, if your offer on the home is $300k, a well rounded offer would also include $500 DD and $3000 EMD. I can't stress enough how different ways there are to do this and put yourself in a position to negotiate from strength, so just make sure your agent knows what they are doing.
If you are looking to buy a home and would like an expert to represent you, give us a call at (828) 707-5642. We are here to help.