Sandman Team
NC Transactions Overview
Details on the Purchase Process in 2011 ...
Beginning January 2011, The North Carolina Association of Realtors (NCAR) revamped the Contract Forms that we use in our Business in North Carolina. Most notably are the changes in the Offer To Purchase and Contract Form – specific to the timelines for Inspections and Loan Financing Commitment.
In Prior Years there was actually a timeline for the Home Inspection with specific Remedies to the Buyer and Seller regarding a Buyer’s request for any repairs.
The Loan commitment time period was typically a certain Number of days from the date of contract – during which the Buyer had to obtain a Firm Loan Commitment.
The New Forms basically make this whole process simpler and at the same time more complicated.
The New Forms Now have what is called a “Due Diligence” Period. This “Due Diligence” Period is a time period, usually a certain number of Days from the date of Contract (30 days to 45 days) during which the Buyer has the opportunity to have any (or, no) inspections completed. This is also the time period in which the Buyer will obtain any loan commitment if the Buyer intends to obtain Financing.
There is still an Earnest Money Deposit – that has not changed. The Earnest Money check is submitted with the purchase offer and is always maintained in a trust account in the favor of the Purchaser (unless otherwise negotiated between parties) and is then credited to the purchase price for the Buyer’s benefit at closing.
The Due Diligence period language plainly states that the Buyer can terminate the Purchase contract for any or no reason up and until 5pm on the date the Due Diligence period ends.
I mentioned previously that the new forms have also been made a bit complicated by the introduction of what is called the Due Diligence Fee. This is separate from the earnest money deposit check and Is actually a check made payable directly to the seller and at whatever point there is a written signed contract, these funds are given to the seller and the seller may cash the check immediately and will keep these funds.
If a Buyer closes on their purchase then the due diligence fee (and, the earnest money deposit check amount) are credited against the purchase price for the benefit of the buyer. If, however, the Buyer opts to cancel the contract during the Due Diligence period, then the Buyer receives the Earnest Money back, … “However, the Seller keeps the Due Diligence fee”.
The purpose of the Due Diligence fee to that it pays the seller for their having taken the property off the market, while you have an absolute right to cancel the contract during the due diligence time period.
To date, I am seeing $0 Due Diligence Fee with Short Sale property purchase contracts.
I am seeing $300 to $500 Due Diligence Monies in general transactions (including Bank Owned Foreclosures), and have recently had a transaction in which there was a due diligence of $1500.
The Earnest Money Deposit amounts also vary based on purchase price. There is no custom or rule of thumb in our market, however, generally the stronger the Earnest Money the stronger the Overall Purchase Contract will appear to any Seller.
Call or Email with any questions …
John
In Prior Years there was actually a timeline for the Home Inspection with specific Remedies to the Buyer and Seller regarding a Buyer’s request for any repairs.
The Loan commitment time period was typically a certain Number of days from the date of contract – during which the Buyer had to obtain a Firm Loan Commitment.
There is still an Earnest Money Deposit – that has not changed. The Earnest Money check is submitted with the purchase offer and is always maintained in a trust account in the favor of the Purchaser (unless otherwise negotiated between parties) and is then credited to the purchase price for the Buyer’s benefit at closing.
The Due Diligence period language plainly states that the Buyer can terminate the Purchase contract for any or no reason up and until 5pm on the date the Due Diligence period ends.
I mentioned previously that the new forms have also been made a bit complicated by the introduction of what is called the Due Diligence Fee. This is separate from the earnest money deposit check and Is actually a check made payable directly to the seller and at whatever point there is a written signed contract, these funds are given to the seller and the seller may cash the check immediately and will keep these funds.
If a Buyer closes on their purchase then the due diligence fee (and, the earnest money deposit check amount) are credited against the purchase price for the benefit of the buyer. If, however, the Buyer opts to cancel the contract during the Due Diligence period, then the Buyer receives the Earnest Money back, … “However, the Seller keeps the Due Diligence fee”.
To date, I am seeing $0 Due Diligence Fee with Short Sale property purchase contracts.
I am seeing $300 to $500 Due Diligence Monies in general transactions (including Bank Owned Foreclosures), and have recently had a transaction in which there was a due diligence of $1500.
The Earnest Money Deposit amounts also vary based on purchase price. There is no custom or rule of thumb in our market, however, generally the stronger the Earnest Money the stronger the Overall Purchase Contract will appear to any Seller.
Call or Email with any questions …
John