Ever wondered why some offers in Charleston include both an earnest money deposit and a due diligence fee? If you mix them up, it can cost you thousands. Whether you are buying on Daniel Island, selling in Mount Pleasant, or eyeing an investment on the peninsula, you deserve simple, clear guidance. In this post, you will learn what each payment is, how refundability works, typical amounts in our market, and smart ways to negotiate your timelines and risk. Let’s dive in.

Quick definitions you can trust

Earnest money is a buyer deposit that shows good faith to close. It is held in escrow and, if the sale closes, it is applied to your purchase price. If you terminate under the contract’s allowed reasons, it can be refundable.

Due diligence fee is a negotiated fee paid to the seller for your unrestricted right to terminate during a set due diligence period. It typically is non-refundable if you back out during that window. If you close, it is usually credited toward your purchase price.

Earnest money vs due diligence: key differences

Purpose

• Earnest money: Signals you are serious and performing under the contract. It protects both sides if used correctly.
• Due diligence fee: Compensates the seller for taking the home off the market while you investigate the property.

When you pay

• Earnest money: Usually within a few days after the contract is signed, as the contract instructs.
• Due diligence fee: Often at contract signing or very soon after, based on the negotiated terms.

Who holds it

• Earnest money: An escrow holder named in the contract, such as a closing attorney, title company, or brokerage trust account.
• Due diligence fee: Paid to the seller directly or delivered into escrow then released to the seller per the contract.

Refundability at a glance

• Earnest money: Refundable if you properly terminate under the contract’s protections. If you default after protections expire, the seller may keep it as liquidated damages.
• Due diligence fee: Generally not refundable if you terminate during the due diligence period. If you close, it is typically credited toward the price.

Typical amounts in Charleston

Local custom varies by property type, price, and competition, but these ranges are common around Charleston:

• Earnest money: Often 1 percent of the purchase price, with many transactions falling between 1,000 and 10,000 dollars.
• Due diligence fee: Frequently 500 to 10,000 dollars, and sometimes more in hot, low-inventory situations.

Charleston can be competitive. Sellers may push for shorter due diligence periods, higher due diligence fees, or fewer contingencies. As a buyer, that can help your offer stand out, but it also raises your risk if you change your mind.

How the South Carolina timeline works

A standard process in our market looks like this. Your contract will control the exact terms.

1. Day 0: Contract is signed. You deliver the due diligence fee to the seller or escrow and send earnest money to the escrow agent within the time stated in the contract, often 1 to 3 business days.
2. Due diligence period: Commonly 7, 10, or 14 calendar days, negotiated up front. You complete inspections, appraisal, loan steps, title review, and any HOA or condo document review. You can terminate for any lawful reason during this period by proper notice. If you do, you typically forfeit the due diligence fee and get earnest money back.
3. After due diligence ends: You are bound to proceed unless another contingency applies. If you default after your protections expire, the seller may keep the earnest money. The seller already holds the due diligence fee.
4. Closing: If the sale closes, both the due diligence fee and earnest money are usually credited toward your purchase price per the contract.

What happens in common scenarios

Example A: Terminate during due diligence

• Purchase price: 500,000 dollars
• Earnest money: 5,000 dollars
• Due diligence fee: 3,000 dollars
• Outcome: You terminate during the due diligence window. You forfeit the 3,000 dollars to the seller. The 5,000 dollars earnest money is returned to you.

Example B: Proceed to closing

• Same numbers as above
• Outcome: You close. The 3,000 dollars due diligence fee and the 5,000 dollars earnest money are both credited at closing, reducing the cash you bring by 8,000 dollars.

Example C: Back out after due diligence ends without a right to do so

• Outcome: You likely lose the earnest money, and the seller already kept the due diligence fee. You effectively paid both amounts.

Smart negotiation tips for buyers

• Balance time and risk: A longer due diligence period gives you time for inspections and loan steps, but sellers prefer shorter windows. If you need more time, negotiate it up front.
• Coordinate lending: Work with your lender so financing milestones line up with your due diligence deadline. Avoid letting your protections end before you are ready.
• Book inspections fast: Schedule inspectors immediately after ratification to make the most of your due diligence days.
• Know your exposure: Offer only a due diligence fee amount you can afford to lose if you decide to walk away.
• Lock in escrow details: Confirm in writing who holds the earnest money and how funds are credited.

Strategic tips for sellers

• Push for certainty: A higher due diligence fee and a shorter due diligence period can reduce your time off market and buyer uncertainty.
• Verify handling: Confirm where earnest money and due diligence funds will be held and how they will be disbursed at termination or closing.
• Require clear notices: Ensure the contract specifies how and when a buyer must give written notice to terminate.

Charleston due diligence priorities

Use your due diligence time wisely. In Charleston, a few items often deserve early attention.

• Inspections for age and coastal wear: Older or historic homes may reveal roofing, HVAC, moisture, flood, and coastal construction considerations.
• Flood zones and insurance: Review elevation certificates, flood zone status, and insurance availability and cost. These items can affect your overall budget and comfort level.
• HOA and condo documents: For properties in associations, review budgets, policies, and resale documents to understand fees, rules, and upcoming projects.

Your pre-signing checklist

• Define both amounts: Decide on earnest money and due diligence fee levels that fit your risk tolerance and deal strategy.
• Set a realistic due diligence period: Pick a length that allows inspections, title review, insurance quotes, and loan milestones.
• Clarify escrow: Name the escrow agent for earnest money and confirm how both payments are credited at closing.
• Write every deadline: Put all dates and notice procedures into the contract. Do not rely on verbal understandings.
• Plan your inspections and quotes: Book inspectors and start insurance research immediately after you go under contract.
• Consult a closing attorney: Small wording changes can have big financial consequences. A Charleston closing attorney can explain options before you sign.

Final take

If you remember one thing, let it be this: earnest money is your escrow deposit tied to performance, and the due diligence fee is what you pay for the freedom to walk away during a limited window. In a competitive Charleston market, choosing the right amounts and timelines can make or break your deal and your budget. If you are weighing how to structure your offer or evaluate one on your home, let’s talk through a strategy that fits your goals.

Ready to get a clear plan for your next move in the Lowcountry? Schedule a consultation with Lowcountry Charmed Realty to align your timelines, protections, and negotiation strategy.

FAQs

What is earnest money in a South Carolina home purchase?

• It is a buyer deposit held in escrow that shows good faith and is typically credited toward the purchase price at closing. It can be refundable if you terminate under the contract’s allowed protections.

What is a due diligence fee in South Carolina?

• It is a negotiated, usually non-refundable payment to the seller that gives you an unrestricted right to terminate during the due diligence period. If you close, it is generally credited to the price.

When are earnest money and due diligence fees paid?

• Due diligence fees are often due at signing or soon after. Earnest money is usually due within a few days per the contract, and you send it to the named escrow agent.

Are these payments refundable if I cancel?

• Earnest money is refundable if you terminate properly under contract terms. Due diligence fees are generally not refundable if you cancel during the due diligence period.

Who holds earnest money in South Carolina?

• The escrow agent named in the contract, often a closing attorney, title company, or brokerage trust account. The contract should specify delivery timing and handling.