If you are buying or selling a home in California, Texas, or almost anywhere else, you put down "Earnest Money," and if the deal falls apart, you usually get it back.

North Carolina is different. We have the "Due Diligence Fee."

For standard home sales, this non-refundable check written directly to the seller is just part of the game. But in a Short Sale, the Due Diligence Fee creates a massive financial trap that kills deals before they even start.

Whether you are a distressed seller trying to attract a buyer, or an investor looking for a deal, you need to understand how NC Standard Form 2-A-14-T (The Short Sale Addendum) changes the rules of risk.

The Trap: "The Check You Never See Again"

In North Carolina, the Due Diligence (DD) Fee is money paid directly to the seller immediately upon going under contract. It is the price the buyer pays to take the home off the market while they inspect it.

• The Standard Scenario: Buyer pays $2,000 DD fee. Buyer inspects house. Buyer walks away. Seller keeps the $2,000.

• The Short Sale Trap: Buyer pays $2,000 DD fee. Seller accepts. The bank (Lender) takes 4 months to review the file and then denies the short sale.

  • The deal is dead because the bank said no.

  • The Problem: The seller (who is in financial hardship) has likely already spent that $2,000 on groceries or bills. The buyer is out $2,000 for a house they were never allowed to buy.

This risk scares away smart buyers and agents. If you are a seller, demanding a high Due Diligence fee upfront is the fastest way to ensure your home sits on the market until foreclosure.

The Solution: Structuring the "Short Sale Addendum"

To make a Short Sale work in North Carolina, we have to treat the Due Diligence Fee differently. We use the Short Sale Addendum (Form 2-A-14-T) to protect both parties.

Here is the strategy we use to keep the deal alive:

1. The "Nominal" Upfront Fee

We advise our sellers not to expect a large DD check on Day 1. Instead, we often structure the offer with a nominal fee (e.g., $100 or $500) initially.

• Why: This convinces the buyer to stick around for the 3–4 month bank review process without fearing they are throwing thousands of dollars away on a gamble.

2. The "Approval Trigger"

This is the pro move. We structure the contract so that the "Due Diligence Period" (and the clock for inspections) does not start until we receive the Written Notice of Short Sale Approval from the lender.

• How it looks: The buyer puts up minimal money now. Once the bank says "YES," the clock starts, and the buyer then puts up more significant money or begins their expensive inspections.

• This aligns the risk: The buyer only spends real money once they know the bank has agreed to the price.

A Warning for Sellers: Don't Spend It!

If you are the seller and you do receive a Due Diligence fee, understand this: The deal is not done. While that money is technically yours to keep, spending it immediately can cause major issues if the deal collapses and there is a legal dispute over contract terms. In a short sale, your goal is the Waiver of Deficiency (freedom from debt), not the $500 cash in your pocket today.

The Bottom Line

North Carolina’s Due Diligence laws were written for standard sales, not distressed ones. Trying to force a square peg into a round hole kills transactions.

• Buyers: Do not write big checks to insolvent sellers without a signed Short Sale Addendum protecting your timeline.

• Sellers: Do not get greedy with upfront fees. Focus on the ultimate prize: Getting the bank to approve the sale.