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Due Diligence and the Offer to Purchase
Key Differences in the NC Contract
Understanding the Due Diligence Fee
Canceling the Contract
Due Diligence Fee Factors
Earnest Money
Preparation for Buyers and Sellers
Tips for Well-Prepared Buyers and Sellers
The Importance of Pre-Approvals

Due Diligence and the Offer to Purchase

Over the past 8 years, North Carolina has implemented a revised Offer to Purchase and Contract form. Please read, I have highlighted the due diligence section.

If you haven’t purchased a home since 2011 or are from another state, you might be surprised by the NC contract forms. They are frequently updated, and this article will focus on the Due Diligence sections.

Key Differences in the NC Contract

When making an offer on a home in North Carolina, you’ll need to provide two deposits: the Due Diligence Fee and Earnest Money. The amounts for these fees vary depending on factors such as market conditions, buyer qualifications, and property condition. Customary amounts may differ across areas or towns in NC.

If you successfully purchase the property, both deposits will be credited towards the purchase. If you decide to cancel the contract during the Due Diligence period, the seller keeps the Due Diligence Fee, while the Earnest Money is returned to you.

Understanding the Due Diligence Fee

The Due Diligence Fee is similar to an option fee. The buyer pays the seller to reserve the property while the buyer inspects the property and secures financing. During this time, the buyer can cancel the contract for any reason, even if they simply change their mind.

The contract states that the house is sold “as is,” and the seller isn’t required to make repairs. However, repairs are often negotiated during the Due Diligence period since the buyer can back out and only lose the Due Diligence Fee. The seller usually prefers to reach an agreement to ensure the transaction proceeds.

Canceling the Contract

If the buyer cancels the contract before the Due Diligence period ends, the attorney refunds the Earnest Money, and the seller keeps the Due Diligence Fee. The deadline for this period is always a nerve-wracking time, as the buyer has likely invested in inspections, appraisals, and the Due Diligence fee.

Due Diligence Fee Factors

The Due Diligence Fee depends on various factors, including the time the house has been on the market, competing offers, price, and the property’s condition. In the competitive market of 2021-2022, Due Diligence Fees have soared to 30-50K, often leading buyers to waive inspections and appraisals.

Earnest Money

In the Triangle area, Earnest Money, a security deposit, is typically between 1-3% of the purchase price, with 1.5% being common.

Preparation for Buyers and Sellers

Buyers should be well-prepared, as the Due Diligence Fee requested by the seller is determined by the perceived risk of taking the house off the market. The more prepared a buyer is, the more likely they are to negotiate favorable terms for both parties.

Tips for Well-Prepared Buyers and Sellers

A well-prepared buyer can have the upper hand in a competitive market. Here are essential steps for buyers to follow:

Obtain a pre-approval with supporting documents, including:

Tri-merge Credit Report review
Income documentation review
2-year work history confirmation
Debt to income calculation
Automated Underwriting Approval

Be ready to buy within the next 60 days
Offer reasonable Earnest Money Deposit and Due Diligence Fee
Review disclosures and homeowner documents
Not have a house to sell
Have no other contingencies
Be flexible with the closing date

For sellers to receive a reasonable Earnest Money Deposit and Due Diligence Fee, they should also be well-prepared:

Price the home correctly and be willing to accept a reasonable price
Conduct a pre-listing inspection and make necessary repairs
Avoid needing 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
Stage the home and ensure it’s in excellent condition (including the yard)
Provide the buyer with all disclosures and a current market analysis supporting the asking price
Have a clear title and have owned the property for more than one year

The Importance of Pre-Approvals

Pre-approvals are crucial, as they can influence the Due Diligence period and the buyer’s perceived strength. Sellers may accept a lower fee for pre-approved buyers. Buyers should secure a pre-approval and ensure loan eligibility before risking the Due Diligence fee.

Many seller agents require a pre-approval letter from a local lender with an offer. Although buyers can shop around after pre-approval, having a well-known local lender can strengthen their offer. This refers to the mortgage broker or loan officer, not just the company. A selling agent will have more confidence in closing the loan if it’s through a reputable local lender, which can make a significant difference in the transaction. Give yourself an advantage and get a strong pre approval letter!!

Triangle Area Real Estate

5.0

Based on 22 reviews

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Patricia B

20:52 02 Feb 20

Marianne was our agent when we purchased our home in Chatham County. She is extremely knowledgeable about the Triangle area, specific neighborhoods and builders. Marianne was very thorough and did an excellent job representing us during the entire process; from finding a house, negotiating the offer, and handling all the closing details. We highly recommended Marianne.

Althea Sistare

14:51 17 Jan 20

Marianne helped us buy a beautiful home in Chapel Hill while we were living in Pennsylvania. She was a pleasure to work with and accommodated our schedule perfectly during the few times we were able to be in the area. She patiently drove us around for many hours and several days, helping us rule out every possibility. Our final decision was made without a doubt! We felt very confident in Marianne's guidance throughout the entire home buying process. Her thorough knowledge and experience was very evident. She was there for us every step of the way, especially when we could not be there in person.

Cam Tung

15:49 24 Mar 19

Marianne and Chip were incredibly helpful throughout the new home building process, especially as we were living in Austin! They were both super pleasant, knowledgeable and responsive! We couldn't have done it without them.

Jillian Geneve

14:59 15 Mar 19

Marianne did a fabulous job as our realtor. It was stressful to be relocating to an unfamiliar, new area from out of town, and Marianne was extremely helpful. She had so much experience and knowledge of the neighborhoods, schools, and services for our special needs child, and she was able to advise us on the best location for our family. Even in the middle of a winter storm she was out looking at houses for us, taking detailed videos so we could see the homes from out of state. She was very responsive and always available to answer our many questions about the area. She was very knowledgeable about the buying process and did a great job of negotiating on our behalf. When we got to Chapel Hill, Marianne gave us several different tours, and even took the time to show our son playgrounds all over town. We are thrilled with the home we bought and couldn’t have done it without her. I highly recommend her!

Yanina Costecalde

16:57 24 Jun 18

Marianne Howell Wright is real Estate Agent; she works with her husband, Chip Wright who was in a construction building contractor. I have been in the area for year and knew quite well the market, and where I wanted my family to be, which I recommend to any new buyer. I contacted Marianne because I liked her videos and she seemed knowledgeable about the area. They both came straight away, which other agents do not do. In general, Marianne recommends new constructions over old houses because she often goes to new development meetings and is well aware of the new construction materials (lighter, better, and more efficient). However, I chose an old house. Being single, Marianne and Chip made sure that I understood what it meant to choose a house that required a lot of work. Once it became clear that I knew what it would take to fix the house, Chip and the inspector built a terrific file and Marianne negotiate and reduced the price significantly, which is rare for the area. I invested this extra money in the house and hired contractors with Chip helps. The house was ready for my family in a month. I would like to add that Chips was not keen to advice for contractors because some clients might be suspicions of his intentions, but if you ask, he would tell you.A house is everyone own choice. You are the only one who knows what your family likes, can afford, and able or not to handle small/big improvement projects. What chip can do is to give you a far opinion on the house condition. What Marianne can do is to build the best file in order to negotiate the best price for the buyer or the seller. I recommend this team because they are professional, reliable, and efficient.

Elaine Lux

01:16 09 Jun 18

Marianne is awesome! She was available to us during the entire process of building our new home, from selecting the lot through our final walk-through. Building a new home, especially while living out-of-state, can be nerve-wracking. Having Marianne represent us was such a smart decision. She is so knowledgeable about the new build process and construction, and brought things to our attention that we never would have thought about. She truly looked out for our best interests. She was available to us each and every time we needed her. We now have a brand new home that is well-built and gorgeous! We thank Marianne for the huge role she played in making that dream come true for us!

Maureen Pulscher

21:38 04 Jun 18

Marianne helped my husband and I find a new home in the Triangle area while we were still living out of state. We made a few trips to look at properties and Marianne always made the most of the short amount of time we had and helped us cover a lot of ground. She also spent plenty of time on the phone and over email with us educating us on the area and providing fantastic local insights. She is extremely responsive and will track down information for you. She kept us well informed throughout the buying process and helped us learn what to look for as first-time new construction buyers. She also was tremendously helpful in the new construction walk-throughs, pointing out things and asking questions I did not know to ask. I highly recommend Marianne, especially if you are moving to this area from out of state!

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