Wholesaling - Question about Due Diligence Fee in NC
In North Carolina, it's customary to have a "due diligence" fee when executing a purchase agreement. Where I come from in Florida, there is no such thing. This is alien language to me. The buyer had 10-14 days to inspect the property with a guarantee of 100% refund pursuant to Florida RE law.
So here is my question, for all of you wholesalers, are you entering a "0" in that space? OR.. is it not included in your purchase agreement? I can't imagine wholesalers here are putting up non-refundable money to get purchase agreements.
Would love to know the thoughts of some seasoned NC wholesalers on this. Thank you!!
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Real Estate Agent North Carolina (#333766)
- SERHANT.
If you plan on buying the property you place under contract, the due diligence (earnest money) fee is a non-issue. As long as the house checks out structurally, there is no need to not buy it.
@Levi Bennett We place DD $ on our contracts. We take title to almost all of them, and then sell them. We assign very few.
@Randy E. we are not planning on purchasing any at this time, they will always be an assignment. Not all deals close, so I don't want to pay out a DD fee that's not refundable if inspection doesn't go as planned, or we have an investor who would want to pay an assignment have an issue at the last minute.
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Real Estate Agent North Carolina (#333766)
- SERHANT.
@Adam Schneider are you double closing or doing a value-add rehab before selling?
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Real Estate Agent North Carolina (#333766)
- SERHANT.
@Levi Bennett -- that's a good question. It's a mix. Some, we just market as is without doing any work. Some, we do work to make the properties eligible for loans.
We usually put up a small amount. somewhere between $10-$50. If I sign a contract, I have the intention of following through with the seller and only bailing out as a last resort. Honestly, though, closing and then listing on the MLS has made us significantly more money than putting it out to our buyers list beforehand. That could be because we are primarily rehabbers and not wholesalers, but even my high volume wholesale friends have found that to be true and have changed a lot of their business model to accommodate listing on the MLS.
Hello Levi. I think it really depends on the seller and how good of a deal you may have. We do not offer a Due Diligence Fee, and we wouldn't unless we are 100% certain when we present the contract, that we will be closing on the property. Unless your seller is savvy or there are multiple offers on the property, you should have no problems with placing an Earnest Money Deposit in escrow. That way, if something comes up prior to your due diligence period expiring, you are able to terminate the contract by notifying the sellers in writing, or try to renegotiate the terms without losing your EMD. Due diligence fees are great for the seller, but I would not recommend offering them as a buyer unless you absolutely feel the need to.
earnest money and due diligence fees are two separate things. Earnest money is refundable to buyer if buyer walks out during the due diligence period. Due diligence fee is money paid to buyer for basically taking it off the market. It goes towards the purchase but is only refundable in very small number of situations where seller backed out.