Only one state formally builds a due diligence fee into its standard residential purchase contract: North Carolina. Texas uses a nearly identical tool under a different name, the option fee. South Carolina recognizes a similar concept, though its market practices are less standardized. Everywhere else, buyers and sellers rely on refundable earnest money deposits and contingency clauses rather than a separate upfront, non-refundable payment. If you are asking which states have due diligence fees, the practical answer is North Carolina by that exact name, Texas by a different name that works the same way, and no one else as a matter of standard contract.
North Carolina: The Only State That Names It a Due Diligence Fee
North Carolina’s standard purchase agreement is the Offer to Purchase and Contract (Form 2-T), jointly approved by the North Carolina Bar Association and NC REALTORS®.1North Carolina Real Estate Commission. Offer and Acceptance That form creates a due diligence fee the buyer pays directly to the seller when the contract takes effect. The amount is negotiated and depends on local demand, how long the property has been listed, and the length of the due diligence period itself.2North Carolina Real Estate Commission. Due Diligence Questions and Answers
In competitive markets, the fee can run from a few hundred dollars on a modest condo to $5,000 or more on a desirable single-family home. During bidding wars for high-end properties, fees of $10,000 to $20,000 are not unusual. The money belongs to the seller the moment they receive it, whether or not the sale closes.
The due diligence period is also negotiated and written into the contract. Many transactions use a window of about 14 to 30 days, though shorter or longer periods are common depending on the complexity of the property. The period ends at 5:00 p.m. on the date specified in the contract. During that window, the buyer has the unrestricted right to terminate for any reason or no reason at all.1North Carolina Real Estate Commission. Offer and Acceptance If the buyer walks away during that period, they lose the due diligence fee but get their earnest money back.
How It Differs from Earnest Money
Buyers new to North Carolina often confuse the two payments because both go out early. They work very differently. The due diligence fee goes straight to the seller and is non-refundable in most scenarios. Earnest money is held in escrow by a third party and is fully refundable if the buyer terminates during the due diligence period.1North Carolina Real Estate Commission. Offer and Acceptance Once the period expires, the buyer loses that free exit and the earnest money becomes at risk of forfeiture if the buyer breaches.2North Carolina Real Estate Commission. Due Diligence Questions and Answers
When the Fee Can Come Back
The due diligence fee is non-refundable by default, but Form 2-T carves out narrow exceptions. The buyer can recover the fee if:3NCREC Bulletins. Due Diligence Fees: When Are They Refunded
- The seller materially breaches the contract, in which case the buyer may recover the fee, the earnest money, and reasonable costs incurred during the investigation.
- The seller fails to comply with the specific obligations in Paragraph 8 of Form 2-T.
- The property is destroyed or materially damaged before closing under the Risk of Loss provision in Paragraph 12.
- A contract addendum triggers a refund. For example, if the seller terminates during the due diligence period under the Contingent Sale Addendum, the seller must return the fee.
Outside these situations the fee stays with the seller, no matter why the deal falls apart. A buyer who loses financing approval or discovers problems during inspection still loses the fee if they terminate, though they recover earnest money as long as they act before the deadline.
Texas: Same Mechanism, Called an Option Fee
Texas reaches the same result through what its contract calls an option fee and termination option, built into the TREC One to Four Family Residential Contract (Resale).4Texas Real Estate Commission. Contracts The buyer pays a negotiated sum, and the seller grants an unrestricted right to cancel the contract within a set number of days after the effective date. If the buyer terminates during the option period, the seller keeps the option fee but must refund all earnest money.5Texas Real Estate Commission. One to Four Family Residential Contract (Resale) TREC NO. 20-17
Option fees in standard Texas transactions commonly fall between $100 and $500. In competitive markets or for higher-priced properties, buyers sometimes offer $1,000 or more to strengthen their offer. The option period is negotiated and typically runs 7 to 10 days, though any number of days can be written in. Notice of termination must be delivered by 5:00 p.m. local time on the last day of the option period.5Texas Real Estate Commission. One to Four Family Residential Contract (Resale) TREC NO. 20-17
Where the Option Fee Is Delivered
One detail catches many Texas buyers off guard. The option fee is not paid directly to the seller. Since the TREC contract forms were revised in 2021, the buyer delivers the option fee to the escrow agent, typically the title company, which then releases it to the seller. The buyer must deliver the fee to the escrow agent within three days after the effective date of the contract. If the last day falls on a weekend or legal holiday, the deadline extends to the end of the next business day.6Texas Real Estate Commission. Changes to Delivery of Option Fee Missing this deadline entirely eliminates the buyer’s right to terminate under the option provision, which means the buyer is locked into the purchase regardless of what inspections reveal.5Texas Real Estate Commission. One to Four Family Residential Contract (Resale) TREC NO. 20-17
Credit at Closing
If the sale closes, the option fee is credited against the sales price at closing automatically under the TREC contract, with no special election needed.5Texas Real Estate Commission. One to Four Family Residential Contract (Resale) TREC NO. 20-17 North Carolina’s Form 2-T applies the same treatment to the due diligence fee. In both states the fee functions as an advance toward the purchase price for buyers who go through with the deal, and the credit should appear on the Closing Disclosure the lender provides before closing.7Consumer Financial Protection Bureau. Closing Disclosure Explainer Review that statement carefully, because errors are much harder to fix after the closing appointment.
What Other States Do Instead
If you are buying outside North Carolina and Texas, do not expect to see a line labeled “due diligence fee” in your contract. South Carolina recognizes a similar concept, but its market practices are less standardized than its neighbor to the north. Across the rest of the country, the standard structure uses an earnest money deposit held in escrow and a set of contingencies (inspection, financing, appraisal) that let the buyer back out and recover the deposit if specific conditions are not met. There is no separate, non-refundable payment to the seller for the privilege of inspecting the property. If someone asks you to pay a fee of that kind in a state that does not use the mechanism, treat it as a red flag worth running past your agent or attorney.
What Happens If the Window Expires
Most of the real financial risk lives here, and it works similarly in both states. Once the due diligence period in North Carolina or the option period in Texas expires, the buyer loses the right to walk away without consequence. In North Carolina, the earnest money is now at stake, and the seller may be entitled to keep it as liquidated damages if the buyer breaches.2North Carolina Real Estate Commission. Due Diligence Questions and Answers In Texas, the buyer is contractually bound to proceed, and forfeiture of earnest money is the typical remedy for backing out without a valid contractual reason.
Buyers sometimes assume they can still cancel after the window closes and just lose the option fee or due diligence fee. That is wrong. After the deadline, the stakes jump because the earnest money, which is almost always a much larger sum, is also at risk. In North Carolina, earnest money deposits of $1,000 to $5,000 or more are common on top of the due diligence fee. Letting the deadline slip by without making a decision is one of the most expensive mistakes a buyer can make in either state.
Using the Window Well
The whole point of paying a due diligence or option fee is buying time to investigate before committing. Buyers who pay the fee and then sit on their hands waste both the money and the protection it buys. At a minimum, schedule a general home inspection, which typically costs a few hundred dollars depending on the size and age of the property. Specialized inspections for radon, mold, termites, or foundation problems add to the cost.
A professional appraisal is usually required by the lender and costs several hundred dollars, though the exact amount varies by property type and location. Beyond physical inspections, this is the right time to review title search results, confirm zoning and land-use restrictions, verify property boundaries through a survey, check for liens or easements, and review any homeowners association documents. In North Carolina especially, where the fee is non-refundable, smart buyers front-load these tasks and set internal deadlines well ahead of the contractual cutoff so they have time to negotiate repairs or terminate if something goes wrong.