Earnest Money vs Due Diligence
What is earnest money and due diligence:
When you find a home that you decide to make a offer on, you and the sellers are entering into a contract stipulating the final price and requirements. To prove to the seller that your offer to purchase the home is earnest or in good faith, you will be required to make an earnest payment. If the offer is accepted, the seller takes the house off the market. While the house is in a due diligence period, it allows you to do your due diligence(inspections, appraisals, review of documents, survey, financing, obtaining insurance, etc). If within that due diligence period, you decide to walk away, the earnest deposit is refunded to you. If you move forward with the closing, the earnest deposit will be credited to your loan balance at closing.
The due diligence fee is paid by the buyer directly to the seller, which the seller keeps no matter what! The due diligence fee, allows you also, to do your due diligence(inspections, appraisals, review of documents, survey, financing, obtaining insurance, etc). If you decide to walk away from the contract for any reason the seller keeps the due diligence fee. If you decide to move forward with the closing, the due diligence fee is credited to your loan balance at closing.
The Earnest Deposit, protects the buyer and Due Diligence, protects the sellers. It protects the buyer, by allowing a due diligence protection period and if the buyer would like to walk away, they get their money back. It protects the seller, by providing upfront money, to keep the home off the market, during the due diligence period. If the closing proceeds, a credit will be given.