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.
Also see:
- House of Brands vs. Branded House
- Qualitative Observation vs. Quantitative Observation
- Primary Source vs. Secondary Source
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