This Home is staged and pre inspected- ready for the market
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.
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.