Heard you need to write two checks when you buy on the Outer Banks and wondered why? You are not alone. North Carolina uses both a due diligence fee and earnest money, and each one serves a different purpose in your offer. In this guide, you will learn what each fee does, how they work in Dare County, and how to time inspections and financing so you protect yourself and stay competitive. Let’s dive in.
Due diligence vs. earnest money
Due diligence fee
- A negotiated, upfront payment to the seller when your offer is accepted.
- It compensates the seller for taking the home off the market while you investigate the property.
- It buys you the right to terminate for any reason within the agreed due diligence period.
- It is typically non-refundable if you walk away, but it is credited to you at closing.
Earnest money
- A deposit that shows good faith, held in an escrow trust account by a designated escrow agent.
- It is refundable if you terminate properly under the contract, such as during the due diligence period.
- If you breach after the due diligence period without a contractual right, the seller may keep it under the contract’s remedies.
- It is also credited to you at closing.
Who each one protects
- Due diligence fee: mainly protects the seller by compensating for lost marketing time. It also protects you by securing an exclusive window to inspect and decide.
- Earnest money: protects the seller if you breach after your due diligence period ends, and protects you when the contract gives you the right to terminate on time.
Key terms to negotiate
- Amounts and timing for both payments.
- The due diligence period length by date or number of days.
- Who holds earnest money in escrow and when it is due.
- Clear termination steps and how funds are disbursed if the deal ends.
OBX practices and timing
- Due diligence fee is often delivered to the seller at acceptance, per the contract.
- Earnest money is usually due to the escrow agent within a short window set in the contract, commonly a few business days.
- In Dare County, local closing attorneys or title companies commonly act as escrow agents and manage trust accounts under North Carolina rules.
A simple OBX example
This is an illustration only to show how the pieces work together.
- Price: $600,000
- Due diligence fee: $3,000 paid to the seller at acceptance
- Earnest money: $6,000 deposited in escrow
- Due diligence period: 10 days
If you terminate within the 10-day window, you typically lose the $3,000 due diligence fee, and the $6,000 earnest money is returned under the contract. If you fail to close after the due diligence period without a contract excuse, the seller may keep your earnest money. In all cases, both amounts would be credited to you at closing if you proceed.
Typical OBX timeline
Every transaction is unique, but these ranges are common in coastal North Carolina and should be set in your offer.
- Due diligence period: often 5 to 15 days
- Earnest money delivery: usually within 1 to 3 business days after acceptance, per contract
- Inspections: aim to schedule within the first few days of your due diligence period
- Survey and septic or elevation items: allow 7 to 21 days based on vendor availability
- Financing and appraisal: often 21 to 45 days to full approval
- Closing: commonly 30 to 60 days after acceptance
Step-by-step schedule (example)
- Day 0: Offer accepted
- Pay due diligence fee to the seller per the contract.
- Deliver earnest money to the escrow agent within the contract window.
- Your due diligence clock starts.
- Days 1–3
- Order a general home inspection and, if applicable, septic and specialty inspections.
- Start title work and provide your lender with documents if you are financing.
- Request HOA documents, elevation certificates, and any coastal hazard disclosures available.
- Days 3–10
- Complete inspections, review reports, and negotiate repairs or credits before your deadline.
- Obtain homeowners and flood insurance quotes and confirm binder timelines.
- If you choose to terminate, deliver written notice before the due diligence deadline.
- After due diligence
- Your right to unconditional termination ends unless another contingency applies.
- Earnest money is at risk if you breach without a contract right to cancel.
- Continue with appraisal, underwriting, title work, and closing prep.
- Closing window (often Day 30–60)
- Final loan approval, sign closing documents, wire funds, record the deed.
Coastal factors that affect your offer
- Flood zones and insurance: If the home is in a Special Flood Hazard Area, your lender will require flood insurance. Elevation certificates and prior claims history can affect pricing and timing. Insurance steps are best handled early in due diligence.
- Septic and well considerations: Many OBX homes rely on septic systems. Confirm inspections and any records during your due diligence period.
- Short-term rental rules: Towns across Dare County, including Nags Head, Kill Devil Hills, Kitty Hawk, Southern Shores, Manteo, and Hatteras, have local permitting and tax requirements. Verify the current rules for the specific address.
- Seasonal scheduling: Peak tourist and hurricane seasons can reduce vendor availability and delay inspections. Build buffer time into your due diligence.
Negotiation tips in a competitive OBX market
- Adjust the due diligence fee: A higher fee can strengthen your offer without increasing escrow risk, since it compensates the seller up front.
- Calibrate earnest money: A larger deposit can show commitment to the seller. It remains protected by lawful termination rights during the due diligence period.
- Right-size your due diligence period: Shorter periods can win in multiple-offer situations. Ask vendors about realistic timelines before you lock in dates.
- Clarify contingencies: Spell out financing, appraisal, inspection, and title timelines clearly to reduce disputes and protect your interests.
What to do during due diligence
- Schedule a general inspection, septic inspection, and any specialty inspections.
- Order a survey or verify that an existing survey meets your needs.
- Request the elevation certificate and review FEMA flood map details.
- Secure homeowners and flood insurance quotes and confirm binder timing.
- Verify short-term rental permits and rules if you plan to rent.
- Confirm title search status and flag any easements or restrictions early.
- Coordinate appraisal timing with your lender.
- Set up local support if you are out of area, including a buyer’s agent and inspectors.
Common mistakes to avoid
- Waiting to schedule inspections until late in your due diligence period.
- Assuming flood insurance will be quick or inexpensive without quotes.
- Overlooking septic capacity and records on homes served by septic systems.
- Setting a due diligence period that is too short for your vendors’ schedules.
Bottom line for Dare County buyers
Due diligence and earnest money are both standard in North Carolina. They work together to create a fair window for you to investigate while giving the seller confidence. In the Outer Banks, vendor schedules, insurance, and seasonal weather can change your timing, so plan your due diligence period with care and keep your escrow deadlines tight. If you want a confident path from offer to closing, partner with a local team that manages these details every day.
Ready to navigate your OBX purchase with clarity and confidence? Connect with Brad Beacham for local guidance tailored to your goals.
FAQs
What is the difference between due diligence and earnest money in NC?
- The due diligence fee is a non-refundable payment to the seller for your right to investigate and cancel within a set period, while earnest money is an escrowed deposit that can be refundable under contract rules and is at risk if you breach after due diligence ends.
How long is a typical due diligence period in Dare County?
- Many OBX deals use 5 to 15 days, but the length is negotiable and should reflect inspection, insurance, and vendor availability for your specific property.
When do I have to pay earnest money in an OBX purchase?
- Your contract sets the deadline, often within a few business days after acceptance, and identifies the escrow agent who will hold the funds in a trust account.
Are both the due diligence fee and earnest money applied at closing?
- Yes. If you close, both the due diligence fee and earnest money are typically credited toward your purchase price or closing costs.
What happens if I cancel during the due diligence period?
- You usually forfeit the due diligence fee to the seller, and the earnest money is returned according to the contract’s termination terms.
How do coastal issues like flood insurance affect my timeline?
- Properties in certain flood zones may require flood insurance, and obtaining quotes, elevation data, and binders can add time. Start these steps early in your due diligence period.
