![]() What is the difference between due diligence money and earnest money?īoth the due diligence money and earnest money are good faith payments. The due diligence money is a good faith payment made by the buyer to show the seller that he or she is interested and serious in purchasing the home and to compensate the seller for taking the property off the market should the buyer decide not to go through with the home purchase. When a contract is signed and the buyer’s due diligence period begins, the seller will generally remove the property from the market thereby losing out on other interested buyers. This investigation is called due diligence in real estate. ![]() ![]() Typically, when buying a home, a buyer will want to get the property inspected, appraised, title researched, and so on to ensure that there are no hidden defects or other factors that may influence his or her purchase decision. However, if the buyer withdraws from the transaction, the due diligence money will be used to compensate the seller for having withdrawn the property from the market during the due diligence period and potentially having missed out on other interested buyers.īuying a home or real estate property is probably one of the biggest investments a person can make in his or her lifetime.Īs a result, it’s important that you make sure that you pay for a property for what it is truly worth and have all the proper information on the property before making a final decision to move forward with the purchase. If the buyer is satisfied with the outcome of the due diligence, then the transaction will go through and the due diligence money will get credited toward the purchase of the home. In essence, due diligence money is an amount of money that a potential home buyer agrees to pay a property seller to compensate the seller for taking off his or her property from the market during the due diligence period.ĭuring the due diligence period, the buyer has the right to inspect the property, get a property appraisal, do research on the title of the property, review the homeowners’ association bylaws and rules, and so on. Due diligence money refers to an amount of money a home buyer pays a seller as soon as a purchase offer is accepted and the homebuyer’s due diligence period begins. ![]()
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