There’s a misconception that price is all that matters when you make an offer to purchase a home. If you offer the most money, you’re all but guaranteed to have that offer accepted.
That’s not true. There are other ways to make your offer more appealing and shift the odds in your favor, especially when someone is offering the same or even a higher price.
Due Diligence
Besides price, the due diligence fee is often the biggest negotiating chip for buyers, especially in a competitive seller’s market.
The due diligence fee is a negotiated, non-refundable fee paid by the buyer directly to the seller immediately upon the contract execution. The buyer can cancel the contract at any time, but If the buyer chooses to walk away from a contract, the seller keeps the due diligence fee. The buyer will only get the money back if the seller breaches the contract.
Although the seller may agree to make repairs or offer credit to cover repair costs by the buyer, the seller is not obligated to do so. According to the standard NC Purchase Contract, “the property is being sold in its current condition, unless otherwise agreed upon by the seller and buyer at a later date”, usually during the due diligence period.
There is risk involved, but due diligence can sway the seller to your offer on a home you really want. The higher the due diligence fee, the less likely the buyer is to walk away. To be clear, due diligence is not paid on top of the home price. At closing, the due diligence fee is given as a credit to the buyer.
Earnest Money Deposit
An earnest money deposit protects the seller against a buyer walking away from a deal after the Due Diligence period expires. It shows the buyer is serious when the seller accepts the offer and takes the home off the market.
Unlike a due diligence fee, an earnest money deposit is refundable and held in escrow by a third party.
If a buyer terminates a contract prior to the end of the due diligence period, or a condition of the contract isn’t satisfied by the seller, the earnest money deposit is returned to the buyer. If the buyer continues to move forward under the terms of the contract beyond the Due Diligence period, the earnest money becomes non-refundable, but it is credited to the buyer at closing (along w/ the DD fee).
*During the recent hot market, sellers were receiving due diligence fees of tens of thousands of dollars or more and earnest money deposits were rarely used as a negotiating tool. However, they are still required to be included in contracts even if $0.
Terms
Can you close within 30 days? Would you like the seller to include personal property in the sale? How are you paying for the home? Cash? Mortgage? How big of a down payment are you willing and able to make? Are you willing to provide a seller possession after closing, or accommodate any special requests regarding the seller moving out?
These are just a few examples of terms that can strengthen your offer. The right terms will also help find a good match between buyer and seller whose needs are aligned. Remember, the goal is to reach an agreement that’s fair and desirable for both sides.
Got questions about how to make a strong, fair Home offer with proper pricing, due diligence fees, earned money deposits, and terms?
Let’s talk! Call 919-451-0593 or contact me and I’ll be happy to answer your questions!
