Typically the most stressful time for sellers, the due diligence period is where the potential buyers get to inspect and scrutinize your property for defects. It’s important to remember that buyers are entitled to this period, and you should allow them access to facilitate a smooth transaction. Sellers are unable to back out of the sale at this point, so we advise our clients to be patient and wait to hear from the buyers. We’ll outline a few of the important aspects of your due diligence period and the earnest money deposit.
What Happens During Due Diligence?
The due diligence period is a defined period of time the sellers have to inspect every aspect of your house. Typically the lenders will order an appraisal and the buyers will have an inspection done. Sometimes buyers will also have a survey and do specific inspections such as radon, HVAC, electrical, roofing, plumbing, etc. They are making sure the house is free of major defects before they complete their purchase. The buyer or the buyer’s representatives may be at the house several times during this period. We recommend not being present and taking any pets or kids on a trip away from the house. It’s definitely inconvenient, but it’s necessary for getting your house sold.
Due Diligence Deposit VS Earnest Money
There are two deposits you’ll receive during in your offer. We’ll go over them when you receive them, but they’re directly related to your due diligence period. The first is your due diligence deposit. This is typically a check written out to you. It’s your money, and you can spend it. There are not many cases where a buyer gets this money back, the main one being if you were to breach the contract. The due diligence deposit is the amount of money the buyers pay to you to take your house off the market while they inspect it. The buyers can back out FOR ANY REASON OR NO REASON AT ALL during this period and they will be entitled to their earnest money deposit back. If a buyer has repair requests (more on this later), they will expect a response before the close of their due diligence period or they could consider backing out of the purchase at no additional cost to them.
The earnest money deposit is the amount of money the buyers are offering the as compensation if they do not complete the sale. After the due diligence period, they buyers (but not the sellers) can still back out FOR ANY REASON OR NO REASON AT ALL, but they will now also lose their earnest money deposit. Earnest money is held in escrow by the listing firm sometimes, or the attorney more commonly. During this period, the seller still cannot back out or they will be in breach of the contract and potentially owe both deposits back to the buyer.
The term “as is” is a given in NC. Repair requests are not guaranteed by the seller. However, this does not mean that buyers won’t ask, and it doesn’t mean you shouldn’t consider reasonable requests. These requests can range anywhere from trimming the landscaping to replacing the roof. It’s important to address each request individually. A good buyer agent will instruct their buyers to ask for only the most critical items, but some will inevitably drop the whole inspection report on you. This is another point where you can counter anything or nothing. If the requests are reasonable, we advise considering granting them. If the requests don’t require a permit in your county, the NC Real Estate Commission only says they need to be done in a “good and workmanlike manner” to be considered acceptable. This means minor repairs or requests can be done by you, if you’re handy enough.
After Due Diligence
Once the due diligence period has passed you’ll be entitled to the earnest money deposit if the buyers back out. This sounds nice, but it’s really the last thing we want to happen at this point. Earnest money disputes can be long and tie up an otherwise smooth sale. As long as there are no disputes, we now play the waiting game until closing. On the buyer’s side, they will be firming up things like getting their insurance, getting final loan approval, and preparing to change over the utilities. This period is the perfect time for you to start packing and getting ready to move to your new house or transitional residence.