The New NC Offer to Purchase and Contract
A Prepared Seller-Staged and Inspected
Starting Jan. 1 2011 NC has a new Offer to Purchase and Contract form (along with many other revised forms). Your agent will let you know what forms you will need for your transaction. Your agents company may have made additions to the forms to comply with company policies.
This new offer form will substantially change the way we negotiate offers in NC so I thought I would write about it. If you have questions or anything to add please leave a comment. We’ll all be learning as we use it.
This new form provides for a Due Diligence Fee and Due Diligence time period similar to what NC has had for years with the commercial contract. In addition to earnest money the buyer will be asked to provide a Due Diligence Fee. The amount of both will be negotiated between the buyer and seller.
The Due Diligence Fee is similar to an option. The buyer is paying a fee to the seller to keep the property off the market while the buyer decides whether to continue with the transaction. If the buyer decides not to proceed before the expiration of the Due Diligence period the earnest money is refunded and the seller keeps the Due Diligence Fee. Time is of the essence with the Due Diligence time period.
Prepared Buyers and Sellers
It is important for the buyer to be well prepared because the amount of the Due Diligence Fee demanded by the seller will be determined by the amount of risk the seller feels he will have by taking his house off the market.
A well prepared buyer will:
- Have been preapproved and can demonstrate the ability to get financing (or pay cash and has the verifications)
- Is ready to buy within the next 60 days
- Pay a reasonable price for the home
- Offer a reasonable Earnest Money Deposit and Due Diligence Fee. (My Coldwell Banker office is recommending a EM deposit of 1%-3% and a Due Diligence Fee of a minimum of 10% of that. So if the earnest money is $5,000 a reasonable fee for a prepared buyer would be $500.)
- Have reviewed disclosures and homeowner documents.
- Not have a house to sell
- Have no other contingencies
- Be flexible with the closing date
If a seller expects to get an offer on his home and a reasonable Earnest Money Deposit and Due Diligence Fee he will need to be prepared too.
A well prepared seller will:
- Have priced the home correctly and be willing to accept a reasonable price
- Have had a prelisting inspection and made repairs.
- Not need approval from a lender (short sale) or bankruptcy court
- Allow the buyer a reasonable due diligence fee and period
- Be flexible with the closing date
- Have staged the home and made sure it is in great condition (including the yard)
- Have provided the buyer with all disclosures and a current market analysis supporting the asking price
- Have clear title and owned the property for more than 1 year
Preapprovals are Important
Preapprovals are now more important than ever because there will be a relationship between the due diligence fee and time period for due diligence and the strength of the buyer. It can be expected that a seller will accept a lower fee for a buyer who is preapproved. It is also important for the buyer to have the preapproval and be certain he can get the loan before putting the due diligence fee at risk.
