Due Diligence Money vs. Earnest Money: What’s the Difference?

The main difference between Due Diligence Money and Earnest Money is that Due Diligence Money is a non-refundable deposit made by the buyer to the seller to conduct inspections and investigations, while Earnest Money is a refundable deposit made by the buyer as a show of good faith to secure the purchase of a property.

Before we move to more differences, let’s first understand Due Diligence Money and Earnest Money:

  • Due Diligence Money: Due Diligence Money is a payment made by the buyer to the seller during a real estate transaction to compensate the seller for taking the property off the market.
  • Earnest Money: Earnest Money is a payment made by the buyer to the seller at the beginning of the purchasing process.

Now, let’s get to Due Diligence Money vs Earnest Money:

Major differences between Due Diligence Money and Earnest Money

Due Diligence Money Earnest Money
Due Diligence Money is paid after the seller has accepted the offer and during the due diligence period. Earnest Money is paid at the beginning of the purchase process.
Due Diligence Money is typically non-refundable. Earnest Money is usually refundable if the purchase falls through.
Due Diligence Money is released to the seller at the end of the due diligence period. Earnest Money is released towards the end of the purchase process.
Due Diligence Money is given to the seller at the beginning of the escrow process. Earnest Money is given shortly after the contract is executed.
The amount of Due Diligence Money can vary based on factors such as the property’s value, market conditions, and negotiation between the buyer and seller. The amount of Earnest Money is typically a small percentage of the purchase price, often around 1% to 3% of the total.

So, these are the main differences between the entities.

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