You put an offer on a home and it’s been accepted, now the due diligence period begins. In real estate, the due diligence period is the time between an accepted offer and closing. You can schedule inspections, review the title, secure an appraisal, and check for any red flags that could affect your decision to buy.
Whether you’re buying a home in Sarasota, FL, Wyckoff, NJ, or Carrollton, TX, this Redfin guide will walk you through what due diligence means for buyers, what typically happens during this phase.
Table of contents
What is due diligence in real estate? What happens in the due diligence period? How long is the due diligence period? How to prepare for the due diligence period FAQ about due diligence in real estate 
What is due diligence in real estate?
During a real estate transaction, the due diligence period occurs after an offer is accepted but before closing. This timeframe grants the buyer permission to thoroughly inspect the property. It’s a crucial period to verify the property’s condition, ensure it meets expectations, and meet any financing requirements set by the lender.
In some states, buyers may also pay due diligence money—a non-refundable fee paid directly to the seller in exchange for this inspection window. While not required everywhere, it’s an important part of the process in certain markets and is separate from the earnest money deposit.
What is the difference between due diligence money and earnest money?
While both due diligence and earnest money are part of the homebuying process, they serve different purposes and are handled differently.
Due diligence money is paid to the seller, usually non-refundable, and compensates them for taking the home off the market during inspections. This only applies in certain states. Earnest money is a good-faith deposit held in escrow that can be applied to closing costs or the down payment. It’s typically refundable if the buyer backs out for a valid reason like inspection or financing issues.
What happens in the due diligence period?
When buying a home, it’s important to gather all the details you need to make a confident decision. During the due diligence period, the buyer is allowed a set amount of time, typically outlined in the purchase agreement, to fully investigate the property before finalizing the sale.
Here’s what you can expect to happen during this stage.
1. Home inspection
Buyers hire a licensed inspector to evaluate the condition of the home, checking for structural issues, roof damage, plumbing problems, electrical safety, and more. Even if your lender doesn’t require it, it’s smart to hire a licensed home inspector to catch any potential issues.
If the home inspection reveals major problems, the buyer can request repairs, negotiate credits, or even walk away depending on the contract.
2. Home appraisal
If the buyer is financing the home, the lender will usually require a home appraisal to ensure the home’s value supports the loan amount. The home appraisal process is conducted by a licensed third-party professional who assesses the property’s market value based on its condition, features, upgrades, and comparable homes nearby. If the appraisal is lower than the purchase price, it can lead to renegotiation or an appraisal gap issue.
Buyers have options if an appraisal falls short:
Renegotiate with the seller to lower the purchase price. Pay the difference out-of-pocket. Terminate the agreement, if the contract allows. Some buyers use an appraisal gap clause to specify how much they’ll pay above the appraised value.