Confused about why North Carolina asks for two different deposits when you make an offer on a home in Durham? You are not alone. The due diligence fee and earnest money work together, but they do very different jobs. Understanding each one helps you write a stronger offer and avoid unwanted surprises.
This guide breaks down what each deposit is, how the timing works, what happens if you cancel, and how to use both to your advantage in the Triangle market. You will also get checklists for buyers and sellers, plus simple examples with numbers so you can see how funds move. Let’s dive in.
NC’s two-deposit system, in plain English
Due diligence fee (DDF)
- A negotiated, non-refundable payment you make to the seller when your offer is accepted. It pays for your right to investigate the home and to cancel for any reason during the agreed Due Diligence Period (DDP).
- If you close, the DDF is credited back to you on the settlement statement.
- If you terminate within the DDP, the seller keeps the DDF.
Earnest money deposit (EMD)
- A separate deposit that shows good faith. It is held in escrow by the party named in the contract, such as a brokerage or an attorney/closing agent.
- If you close, the EMD becomes part of your funds at settlement.
- If you terminate within your valid contract rights, such as during the DDP, the EMD is typically returned to you. If you breach after those rights expire, the seller may claim the EMD, subject to the contract.
The key idea: the DDF compensates the seller for time off market while you investigate. The EMD secures the seller if you breach after your termination rights expire. Both amounts are negotiated and written into the standard North Carolina Offer to Purchase & Contract.
How timing and delivery work
Where amounts go in the offer
Your contract has separate fields for the DDF, the EMD, and the number of days in the DDP. The contract also names who will hold the EMD and when it must be delivered.
- DDF is usually paid to the seller at acceptance.
- EMD is delivered to the named escrow holder within the negotiated timeline, often within a few business days of acceptance.
When the clock starts
The Due Diligence Period is a fixed number of days you negotiate. It starts on the date of mutual acceptance. During the DDP, you can inspect, investigate, and decide whether to continue or to terminate for any reason. If you terminate within the DDP, the seller keeps the DDF and you typically receive the EMD back. Your open-ended right to terminate under the DDP ends when the DDP ends.
What happens at closing or termination
- If you close: the DDF appears as a credit to you on the settlement statement, and your EMD is applied to your funds due at closing.
- If you terminate during the DDP: the seller keeps the DDF, and the EMD is usually returned to you.
- If you breach after the DDP: the seller may claim the EMD and may also pursue additional remedies, depending on the contract and any legal determination.
Risks, protections, and remedies
Buyer perspective
- Main risks: you will not get the DDF back if you terminate during the DDP. If you breach after the DDP, the EMD may be at risk too.
- Main protections: negotiate a DDP that fits your inspection and financing timelines, deliver deposits on time, and keep all termination rights and dates clear in writing. Some buyers try to negotiate specific financing protections that extend beyond the DDP, which must be carefully drafted.
Seller perspective
- Main protections: you keep the DDF if the buyer exits during the DDP, and the EMD helps protect you if the buyer breaches after termination rights expire.
- Main risks: ambiguous contract language can cause escrow disputes. Clear terms on who holds funds and how they are released help reduce risk.
Dispute handling
If there is a disagreement about the EMD, the escrow holder may continue to hold the funds until the parties agree, a court decides, or the contract release conditions are met. Sellers may treat the EMD as damages or seek additional remedies if the buyer breaches after the DDP, depending on contract terms and North Carolina law.
Durham offer strategy: using DDF and EMD
Durham and the broader Triangle often see strong buyer demand. In competitive moments, sellers tend to favor offers with larger DDF amounts or quicker timelines because that lowers the chance of lost time off market.
- Stronger offers often pair a meaningful DDF with a right-sized DDP. Shorter DDP with a higher DDF can be compelling when you are confident about the property and your loan.
- If you need more time for inspections or financing, a longer DDP with a moderate DDF may make sense, but know it can be less competitive if multiple offers are on the table.
- EMD amounts vary by price point. Some buyers use a flat dollar amount, while others use a percentage of the purchase price. Sellers may view a larger EMD as added seriousness.
Typical ranges in our market evolve with supply and demand. As a general guide, DDFs can range from low-thousands at lower price points to tens of thousands on higher priced homes. EMDs on many transactions range from a few thousand dollars to around one percent or more of the purchase price. Treat these as guidelines only, and let very current comps and offer conditions drive your strategy.
Two quick examples with numbers
- Example A: you offer a $3,000 DDF and a $5,000 EMD with a 10-day DDP. If you terminate on day 7, the seller keeps the $3,000 DDF and your $5,000 EMD is returned. If you close, both amounts are credited toward your purchase.
- Example B: you offer a $10,000 DDF and a $15,000 EMD with a 7-day DDP to be competitive. If you miss the DDP deadline and then fail to close without a valid contingency, the seller may claim the EMD and could pursue additional remedies, subject to the contract.
48–72 hour buyer checklist after acceptance
- Pay the due diligence fee to the seller as the contract requires.
- Deliver the earnest money to the named escrow holder within the agreed timeframe and get a receipt.
- Calendar the exact DDP end date and time so there is no confusion.
- Order and schedule inspections immediately. Common inspections include home, radon, termite, roof, and specialized evaluations as needed.
- Confirm appraisal and loan milestones with your lender and agent. If financing may extend past the DDP, discuss precise contract language for any financing-related termination rights.
- Track all repair requests, responses, and agreed credits in writing before the DDP ends.
Seller checklist in Durham
- Ensure your listing agent explains DDF and EMD to prospective buyers and clarifies who will hold the EMD and delivery timing.
- Decide what DDF and EMD levels make you comfortable, based on current market conditions and your timeline.
- Watch dates closely. Confirm that repair negotiations and any amendments are signed before the DDP expires.
- If a buyer proposes unusual contingency timelines, consult a North Carolina real estate attorney to understand risk and remedies.
Who holds earnest money in Durham
The contract names the holder. Common options include a listing or buyer brokerage trust account, or an attorney or title company trust account. Many buyers choose an attorney or closing agent for higher value transactions. The key is clear contract language about who holds the funds, when funds are due, and how they can be released.
Tax and closing basics
- For sellers: the DDF you receive is generally treated as income in the year you receive it if the buyer terminates. If the sale closes, it is a credit on the settlement statement. For tax treatment of DDF or a forfeited EMD, consult a tax professional.
- For buyers: at closing, both DDF and EMD are applied to your funds due and affect your basis. Ask your tax advisor how to handle these on your return.
How to right-size your DDP, DDF, and EMD
Use your goals, your financing strength, and property condition to set the numbers:
- If you are highly confident in the home and your loan, consider a shorter DDP with a stronger DDF to stand out.
- If you need time for specialized inspections or complex financing, choose a DDP that truly fits the work, then pair it with a competitive but sensible DDF.
- Keep EMD meaningful and on time. It sends a clear signal of commitment and may help in negotiations.
Above all, align deposit strategy with real timing realities. Avoid pushing the DDP too short if inspector availability or lender steps cannot match it. A missed deadline can be costly.
Common pitfalls to avoid
- Waiting to schedule inspections. The best vendors book up quickly. Start within hours of acceptance.
- Forgetting the DDP end date. Missing it can shift significant leverage and risk to you.
- Ambiguous contract language. Make sure the holder of funds, delivery dates, and any financing protections are written clearly.
- Assuming refunds. The DDF is non-refundable if you terminate during the DDP. The EMD can be at risk after the DDP if you breach. Know your dates and terms.
Work with a research-first guide
A thoughtful deposit strategy can be the difference between winning a home and taking on avoidable risk. At Shenandoah Realty, we pair data-driven negotiation with calm, high-touch guidance so you can decide on the right DDF, EMD, and DDP for your situation. If your offer involves complex timelines or unusual contingencies, we also coordinate with your North Carolina real estate attorney to keep every term clear.
If you are planning a purchase or sale in Durham, we would love to help you think it through. Reach out to Shenandoah Nieuwsma to schedule your free 15-minute brainstorming session.
FAQs
Is the North Carolina due diligence fee refundable if I cancel during inspections?
- No. If you terminate during the Due Diligence Period, the seller keeps the DDF. You typically receive the EMD back if you terminate within the DDP under the contract.
What happens to earnest money in Durham if the appraisal is low and I cannot proceed?
- It depends on your contract contingencies. If you terminate under a valid financing or appraisal contingency that is still in effect, the EMD is usually returned. If you are outside all termination rights and breach, the seller may claim the EMD.
Can I make a Durham offer without a due diligence fee?
- Yes, you can, but many sellers view offers without a DDF as weaker because the seller bears more risk of lost time off market.
During the Due Diligence Period, can a seller keep both deposits if I back out?
- Typically no. Standard practice is that the seller keeps the DDF, and the buyer’s EMD is returned if the buyer validly terminates during the DDP, unless different terms are negotiated in the contract.
Who should hold my earnest money on a Durham home purchase?
- The contract names the holder. It can be the listing brokerage, the buyer’s brokerage, or an attorney or title company. Many buyers prefer an attorney or closing agent for higher value transactions.
