Real Estate Vocabulary: Due Diligence

July 12, 2020

It is easy to sometimes get lost in the world of real estate terminology.  That’s why each week I am gong to post a blog to explain different terms and vocabulary that you should understand when buying a home.

This week is focused on the phrase “due diligence,” and it’s one that confuses a lot of buyers and sellers, alike.

Part of why people are confused by the phrase is that it actually gets used to mean two different things:

  1. The due diligence fee, which is a negotiated amount, is paid by the buyer when their offer is accepted.  This fee is given directly to the seller and it “buys time” for the home to be off market while the buyer performs inspections.
  2. The due diligence period is what is “purchased” with the fee, and it is during this time that the buyer can inspect the home, have a survey done, and carry out other tasks to ensure they want to proceed with the purchase.

During the due diligence period, a buyer can walk away for any reason or no reason at all, but they lose the due diligence fee that was paid to take the home off the market.  The seller keeps that fee.  However, if the buyer stays in the transaction and the purchase goes to closing, the fee credits toward the purchase price of the home.

If you have any questions about how due diligence works, just get in touch!  I’m always happy to help.

  • Gary A. Miller
  • 919-428-7469

Gary A. Miller