PRE-PURCHASE

PRE-PURCHASE, A TIME TO ANALYZE!
By Pierre Mouchette | Real Property Experts LLC

​In general, there is no static sum of money for the Buyer to deposit for Earnest Money or Due Diligence.  The amount of earnest money could be a percentage of the purchase price.  Still, both the due diligence fee and earnest money deposit will be decided between the Buyer and Seller and written into the contract.

Your Earnest Money Deposit (EMD) amount is not written in stone except for banks and auctions that usually require 2 to 10-percent down.  You can have a lower EMD by providing solid proof of funds letter, few contingencies, and a short due diligence period.  Your EMD should be held by your attorney instead of the real estate broker or title company.
 
Clarification of Terms
Earnest Money Deposits (EMD) – this is good faith money.  The Buyer is showing the Seller they are serious about purchasing the property.  Characteristics of the EMD are:

• If the Seller is unable to fulfill the contract, the Buyer will get the earnest money back.
• If the Buyer is unable to fulfill the contract, the Seller can keep the earnest money.
• Earnest money is refundable if the contract is canceled within the due diligence period and is credited toward the purchase at closing if the sale goes through. 
• If the Seller accepts the offer, they accept the contingencies, if any, that have been placed with the offer.

Due Diligence Fee - a non-refundable fee that allows the Buyer to investigate the property and the transaction within an agreed-upon time.  Common considerations include but are not limited to (home, pest, septic system inspection, property survey, appraisal, title search, loan qualification and application, repair negotiation, etc.).  The Buyer typically has until 5:00 PM on the expiration date of the due diligence period to terminate the contract for any or no reason at all.  The due diligence fee is non-refundable; however, the Earnest money deposit is refundable if the buyer terminates the contract during the due diligence period.  Diligence Fees are not used in all states.