Deposit in a purchase and sale agreement?

I am in the process of purchasing a property and have recently been presented with a Purchase and Sale Agreement. I am unclear on the deposit requirements for this agreement, and would like to know what is typically expected in this situation. I am also interested in understanding what happens to the deposit if the deal does not go through.

N'kia N.

ContractsCounsel verified

Business Lawyer

Licensed in North Carolina

Free Consultation

A Purchase and Sale Agreement for real property will often require two types of "deposits." The first is a due diligence fee; the second is an earnest money deposit. A due diligence fee is paid to reserve time for the buyer to conduct due diligence - an opportunity to evaluate whether or how to move forward with the deal. The seller earns this fee immediately by agreeing not to sell the property to another buyer, potentially one offering a higher price, during the due diligence period. Therefore, a due diligence fee is nonrefundable unless the parties specifically agree that it will be and under what circumstances. An earnest money deposit is more akin to deposits in other types of deals, in that it may or may not be refundable. This type of deposit is refundable if the deal is terminated before the due diligence period ends but nonrefundable if the due diligence period ends before the deal is terminated.