BIC Tip #1085-Documenting & Explaining the Non-Refundable DD Fee

🧠 Why It Matters

The Due Diligence Fee (DD Fee) is one of the most misunderstood—and most disputed—parts of North Carolina real estate transactions.
As a broker, it is your job to ensure you not only collect it properly but also explain and document it clearly to every buyer and seller involved.

💵 What Is the Due Diligence Fee?

The Due Diligence Fee is a non-refundable payment made by the buyer directly to the seller at the time of contract formation (per the 2-T Offer to Purchase and Contract).

It’s essentially the buyer’s way of saying:

“I’m serious about buying your property—here’s something to show good faith while I do my inspections, appraisals, and financing.”
 

• It’s negotiable between buyer and seller.
   
• It’s paid directly to the seller (not held in trust).
   
• It’s non-refundable, except in very limited circumstances (like seller breach).
   
• If the buyer closes, the amount is credited toward the purchase price at settlement.
   

🧾 Documenting the DD Fee Properly

Every contract file should clearly show:

1. The agreed amount — as written in Paragraph 1(d) of the 2-T form.
    
2. Proof of delivery — a copy of the check, wire confirmation, or receipt.
    
3. Timeline of payment — it must be delivered to the seller by the effective date of the contract unless otherwise stated.
    
4. Acknowledgment of receipt — ideally in writing, signed or confirmed by the seller or listing agent.
   
    

🗣️ Explaining the DD Fee to Clients

Buyers should understand what “non-refundable” truly means.

Here’s a model explanation:

“This due diligence fee goes directly to the seller. It’s not held in escrow and it’s not refundable if you walk away for any reason. What you are buying is time—time to inspect, appraise, and secure financing before the end of the due diligence period.”
 

Agents should document in their file that they reviewed this with the buyer. A short note in the CRM or email follow-up can save the firm during a dispute.

⚠️ Common Mistakes to Avoid

• ❌ Delivering the DD Fee late 
• ❌ Paying the seller’s agent instead of the seller directly.
   
• ❌ Failing to note that it’s non-refundable in communications.
   
• ❌ Not collecting proof of delivery for your file.
   
• ❌ Confusing DD Fee with the Earnest Money Deposit (EMD) — they are separate!