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When buying a home in South Carolina, one of the most important phases of the transaction is the due diligence period. This is the buyer’s opportunity to fully investigate the property before committing to the purchase—and it can make the difference between a confident decision and a costly mistake.
What Is Due Diligence?
Due diligence is a negotiated period of time (often 7–14 days, but it can vary) during which the buyer has the right to thoroughly evaluate the property. During this time, buyers typically:
- Schedule a home inspection
- Order a CL-100 (termite) inspection
- Review the property’s condition and disclosures
- Obtain repair estimates if needed
- Finalize financing and appraisal steps
Essentially, this is the buyer’s “investigation window.” If something concerning is discovered, the buyer can negotiate repairs, request concessions, or even walk away from the contract.
What Is the Due Diligence Fee?
The due diligence fee is a payment made by the buyer directly to the seller (if they elect to terminate the contract during the due diligence period.)
Key Points About the Due Diligence Fee:
- Non-refundable
- Paid directly to the seller
- Compensates the seller for taking the home off the market
- Shows the buyer’s seriousness and commitment
If the buyer decides to terminate the contract during the due diligence period, the seller receives this fee.
💡 Think of it as the cost of having the option to “back out” after inspections and research.
What Is the Earnest Money Deposit?
The earnest money deposit (EMD) is a separate payment that is held in escrow (usually by a closing attorney or brokerage).
Key Points About Earnest Money:
- Held by a neutral third party (escrow)
- Typically refundable during due diligence
- Applied toward the buyer’s closing costs or down payment if the sale closes
- At risk only after the due diligence period ends
If the buyer terminates the contract within the due diligence period, they usually get their earnest money back. If they back out after that period without a valid contingency, they may forfeit it to the seller.
Due Diligence Fee vs. Earnest Money: What’s the Difference?
| Feature | Due Diligence Fee | Earnest Money Deposit |
|---|---|---|
| Who receives it? | Seller | Escrow (attorney/broker) |
| Refundable? | Typically No | Often Yes (during due diligence) |
| Purpose | Compensate seller for time off market | Show buyer’s good faith |
Why This Matters for Buyers and Sellers
For Buyers:
Understanding these two payments helps you balance risk vs. opportunity. A higher due diligence fee can make your offer more competitive—especially in a multiple-offer situation—but it also increases your risk if you decide to walk away.
For Sellers:
A strong due diligence fee provides compensation and confidence that the buyer is serious. It also reduces the seller’s risk of taking the home off the market.
Final Thoughts
Due diligence is one of the most important protections a buyer has in a South Carolina real estate transaction. Knowing how the due diligence fee and earnest money deposit work allows both buyers and sellers to make informed, strategic decisions.
If you have questions about how to structure an offer or protect your interests, working with a knowledgeable real estate professional can make all the difference.
I recently completed a continuing education class which provided a link to an article that explained Due Diligence very well. See below:
https://www.duckfund.com/blogs-re/due-diligence-and-earnest-money-in-south-carolina
