The Property Search

The first item of discussion is how a real estate agent may represent you in the property search and subsequent transaction. North Carolina real estate law allows a real estate agent to represent you in one of several ways; a buyer’s agent, a dual agent, a designated dual agent or a seller sub-agent. Agency is discussed in detail in the North Carolina Real Estate Commission’s Working with Real Estate Agents brochure found here:

The Contract

Once you have found a property you wish to make an offer on, your agent will prepare an Offer to Purchase and Contract on a standard NCAR/NCBAR form. This contract is a standardized “fill in the blank” form all Realtors use. Besides the obvious fields such as parties to the contract and property description, it outlines other terms and conditions of the transaction. North Carolina’s contract has a single due diligence period instead of the multiple contingency contracts used in other states. The due diligence period is negotiable and it’s up to the buyer to perform any and all inspections they desire during that period. They also need to get their financing approved during this period. The buyer may terminate the contract at any time during the due diligence period and the earnest money deposit is refundable as long as the buyer cancels within this time frame. After the due diligence period expires, the earnest money deposit is not refundable in most instances. Occasionally, market conditions dictate that the due diligence period is “purchased” through payment of a due diligence fee. This is most common in a seller’s market when properties are selling fast and furious and the seller is unwilling to give the buyer a “free look”. The due diligence fee is a negotiable fee that is paid by the buyer directly to the seller at contract inception and is not refundable in most cases. As long as the buyer completes the purchase, the due diligence fee is credited towards the purchase price. If the buyer terminates the contract during the due diligence period, the earnest money deposit is refunded but the due diligence fee is retained by the seller as compensation for taking the property off the market while the buyer performed their inspections.

The Due Diligence Period

As outlined above, the number of days included in a due diligence period is negotiable. 30 days is fairly typical, we see shorter periods if it’s a cash deal, longer if there is complicated financing or more detailed inspections involved. Typical inspections performed by a buyer include a home inspection, termite inspection, radon test, septic inspection, survey, title search, review of neighborhood restrictive covenants and any other property investigations that a specific property may require. Any repairs the buyer requests must be negotiated during this time…..the seller is under no obligation to perform any repairs but with the contract being voidable by the buyer during due diligence, often times the seller is willing to perform some, if not all of the requested repairs.  If there is a loan involved, the lender will order an appraisal, title work, title insurance and other government required documentation depending on the loan type.

The Closing

Ok, we have made it through the due diligence period! We have done all of the inspections, negotiated repairs, obtained loan approval, decided we are proceeding with the purchase and the due diligence period has expired. Your agent will gather the utility switch over information that you will need to have the utilities switched into your name on the day of closing. It’s better to order this sooner rather than later, order it now to be switched the day of closing…..one less thing to worry about that way. Before closing, the closing attorney will prepare a settlement statement (commonly referred to as a HUD). This will have the purchase price, credits, debits, pro-rations for taxes and HOA fees and all other adjustments on it. The bottom line will be “cash from buyer”, that’s the amount you will need to close. Many of our closings are “escrow closings” meaning the buyer and/or seller are out of town. The documents are sent by FedEx to the client who has them signed, notarized and sends them back FedEx along with a cashiers check for the balance due. Even when both buyer and seller are in town for the closing, it is almost unheard of for a buyer and seller to sit across from each other at a closing table. In fact, Tina and I have closed over $95 million in real estate over the past 10 years and we have never once had a buyer and seller at the same table together. The reason for this is that North Carolina is a pure race state. This means that ownership of the property does not take place until the deed has been recorded at the courthouse, this normally occurs the afternoon of the closing day. That’s it, congratulations on the purchase of your new home!