Due diligence length and earnest money

searcher profile

March 05, 2025

by a searcher from Brigham Young University in Dallas, TX, USA

I recently submitted an LOI on a business with about $500k SDE (I’ve since thought better of it) and the broker was adamant on limiting due diligence to three weeks and for me to put 1% into escrow as earnest money. I was wondering if this was standard practice in deals this size? I wasn't confident I could get due diligence done in three weeks or if the earnest money requirement was standard practice. Thanks all.

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commentor profile
Reply by an intermediary
in Tallahassee, FL, USA
Nothing is quite standard to say in terms of due diligence time-frame. It's really what both parties agree on. As a broker myself in my opinion the broker is just doing it to keep a shorter time frame in order to get through due diligence as quick as possible because most deals if there going to blow up it's usually during due diligence. With any deal we like to get past due diligence as soon as possible because in doing so there's a lot better chance the deal continuing to a closing. Much larger transactions and the scope of the business most buyers won't feel comfortable with only 3 weeks. I don't find the 1% a problem.
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Reply by a searcher
from Western Illinois University in Atlanta, GA, USA
Just got out of the same situation. DD 3 weeks x amount down... and haven't even seen the business yet. DONT GO BY do a drive by "The seller tells the broker. But put up the asking price into escrow. When we convey to the broker, we will pass. Broker comes back and says, "Ok what about $25,000"?..... Run forest run we did, even faster than Tom Hanks himself!!!!
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