Are Buyers Required to Pay the DD fee?
Q: When a buyer makes and offer and the seller accepts and signs (and communicates acceptance) we have a contract. The buyer gets excited but suddenly gets cold feet and wants to terminate. They have not yet provided me the Due Diligence fee (DD fee) or the Earnest Money Checks. Do we have a contract and is the buyer obligated to pay these fees?
A: Yes. The delivery of the DD and EM does not make or brake the contract in this situation. The signed contract makes it a contract. Likewise, per the agreement the buyer owes the DD fee as of the effective date of the contract. Therefore, if the buyer does not deliver the fee the may find themselves in breach of contract and thus could be sued by the seller. The seller per the standard NC offer to purchase is awarded the liquidated damages in the event of a buyer breach which would be the equivalent of the dd fee AND the EM. What the seller could sue for the EM even though we are still in the dd period? Yes as the lack of delivery likely constitutes a breach and the buyer breach would award DD and EM fees to the seller should they decide to pursue it.
As always Stephen Long is NOT an attorney nor is he offering any legal advice and he would always defer a consumer to their legal counsel for guidance in a situation of this nature. Likewise brokers should consult with their supervision broker in charge.
