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Such a very very wrong interpretation of the NCAR Standard Offer to Purchase and Contract.
So very wrong.
I blame Realtors for not learning the meaning of their own forms, and for messing up market dynamics when they pass on interpretations like this.
Mike, then - will you please share a simple explanation of the NC DD thing, please? Not specific to the OP's situation, but in the majority of normal transactions. (I admit that when I read pjb's post, I thought "oh, I finally understand! So educate me, please?)
Sounds like the mistake was going on like you had a contract without receiving the DD money. It sounds like you only lost 2 days. It sucks, but I doubt legal action is going to create any positive result. You'll probably spend more in legal fees, and even if you win, you still have to enforce the judgement.
Mike, then - will you please share a simple explanation if this NC DD thing, please? (I admit that when I read pjb's pist, I thought "oh, I finally understand! So educate me, please?)
DD Fee:
A negotiated amount given directly to the seller in return for a contract.
DD Period:
A negotiated period of time for a buyer to investigate a property to decide whether to proceed or to withdraw.
Buyer should:
Have all inspections, and agreeable negotiation of any desired repairs.
Appraisal
Loan confidence
Check zoning, survey and plat, suitability of the property for intended use.
Any desired Environmental assessments.
HOA investigation
Schools investigation.
During that DD Period, the Buyer can terminate "...for any reason or no reason" and claim their EMD back. The DD Fee stays with the Seller, by contract.
If the Buyer terminates after the DD Period, the Seller also can claim the EMD.
The day of DD Period Expiration, at 5:00PM, is firm. "Time Being Of The Essence."
__________________________________________________ __________________
Now, some meat for the bones :
The NCAR Forms Committee had for years asked the NC Real Estate Commission for a Due Diligence Period.
Commercial agents use a similar device.
Learn about the property and then either withdraw or go forward. It gained traction and was in discussion in forms revision.
The NC Bar Association cooperates with NCAR on creation of forms and has a voice. We are not like New York where agents strike the deal and attorneys write the contract.
Here, we are provided with Standard Forms as Realtors and we are able to create binding contracts by completing them, adding additional standard form addenda, and avoiding drafting forms which could get us reprimanded for practicing law without a license.
Honestly, and I am whispering.... We believe we probably practice a smidge of law when we put our clients into the market, merely by completing the forms. That is how we engage on a limited fiduciary level. But we need to exercise great caution regarding that issue.
So, anyway, to have viable contract forms, the Bar Association surrenders a sliver of their franchise to us. It serves most consumers well, as typical transactions are able to be consummated within the provisions of those forms when handled by skilled agents.
We can close transactions efficiently and quickly with this facility in place.
But.... The Bar Association has significant say so in the contract forms, as is appropriate. They are contracts. Lawyers do contracts.
The Bar Association representatives to the NCAR Forms Committee argued long and bitterly if a contract without some consideration would be "illusory."
One faction said that without direct consideration, the contract WOULD be illusory.
The other faction said that the buyer's investment in inspections, or EMD would suffice to defeat such a claim
Faction 1 won.
Have you ever seen an old contract that said, "For $5.00 cash in hand, and other valuable consideration, Party A grants to Party B...?"
Well, that was the intent. A nominal fee to avoid the argument. $15--$20. And the cost of Property Investigation.
Realtors immediately went to work to trash out the advantages, BS-ing clients that it was for "Time off the market, or to cover their mortgage payments," and other amateurish fabrications.
When agents claim that the DD Period and the NCAR Standard Offer to Purchase and Contract favor buyers, they are exposing their lack of knowledge of what we had prior to DD Period.
Due Diligence is truly a great improvement over the prior situation.
It is more equitable for the two parties.
Prior to the DD Period revision, buyers had the contractual unilateral right to determine at any time up to closing that they could not arrange suitable financing, withdraw, and have their EMD returned.
Any time up to closing. I had one client who moved out of their house, and 3 days before closing the buyer terminated. They "could not get financing," and went three doors up the street the same evening and went under contract on the same model and floor plan.
It was legal and the Standard Offer to Purchase and Contract made it legitimate. My people were grievously hurt financially, and had no recourse. That crapola is fixed.
We argued over stupid stuff, like whether a 22 year old, 20 year shingle roof needed to be replaced, or whether it was "Serving its intended function." Or whether a repair would exceed a pre-guessed number in a contract.
We had dates for loan app, for appraisal, for all sorts of stuff, and now we have two: DD Period Expiration and Settlement Date.
One intent was to level the playing field.
Sellers (with encouragement from their agents) were hoped to prepare their homes for sale better.
Buyers were hoped to step up and be preapproved, etc.
We are in a Sellers' market in much of Wake County, and have been for a few years now. Sellers still often do little to really be ready for a home inspection, and they often wail when a buyer walks away from a couple of thousand dollars in DD Money and DD costs for inspections.
Sellers deserve better listing agents than they often choose.
Thanks Mike for the explanation and your thoughts. I understand from reading your post that the new system IS better than the old one. Now NC needs to advance its real estate procedures to the modern world, I dare say. With the explanation in mind, the effect of the DD period is still much more advantageous to the buyer, while the seller is in limbo waiting for the buyer to do what is expected of him/her. When the buyer drags his feet, he asks for an extension. Then what does the seller do? He allows the extension & stays in limbo even longer OR if the extension is declined the buyer can literally say, "Bye, bye!" & the seller has lost a month plus of marketing & possible buyers. Not much fairness there IMHO, whatever amount of money was paid upfront.
Thanks Mike for the explanation and your thoughts. I understand from reading your post that the new system IS better than the old one. Now NC needs to advance its real estate procedures to the modern world, I dare say. With the explanation in mind, the effect of the DD period is still much more advantageous to the buyer, while the seller is in limbo waiting for the buyer to do what is expected of him/her. When the buyer drags his feet, he asks for an extension. Then what does the seller do? He allows the extension & stays in limbo even longer OR if the extension is declined the buyer can literally say, "Bye, bye!" & the seller has lost a month plus of marketing & possible buyers. Not much fairness there IMHO, whatever amount of money was paid upfront.
And yet, so many factors favor the seller, it is hard to say the buyer has much advantage.
No seller loses a month of marketing except by personal choice. Many do not allow the home to be shown when under contract. Few agents know how to handle a back up offer properly. (Great question for sellers to ask a prospective listing agent: "Tell me how you would handle a backup offer once we are under contract." The answer should be unhesitating and lucid.)
Almost no sellers do an inspection on their homes, making all repairs prior to marketing, with the hopes that the buyer will miss stuff and seller will not have the expense and hassle of making routine maintenance repairs.
Sellers often do not disclose issues, sometimes even legally with "No Representation" on the form.
Many sellers do not have a property survey to share with buyers.
Most sellers do not offer maintenance records on systems.
A great many sellers have been in their homes for many years, decades even, yet feign shock at the list of stuff a buyer finds in a three hour inspection.
Yet, sellers are able to extract DD Fees from buyers just to agree to allow the buyer to have a few hours to examine stuff the sellers should know after years.
So, when the buyer gives the sellers $1000 nonrefundable, plus spends $500 on an inspection and $120 on a radon test, and $125 on HVAC assessment, and $400 on an appraisal, and walks away over $2000 in the hole because of stuff the seller hasn't bothered to maintain, Seller gets to cry. "Buyer Advantage?"
I don't really buy it.
Seller retains the intact asset. And maybe a reality fix on the buyer's dime.
Buyer is still homeless, with a fairly large outlay of funds to find stuff the seller is in denial on. Having a fair chance to escape a 30 year error because of seller failure to meet their responsibilities seems pretty doggone equitable to me.
And yet, so many factors favor the seller, it is hard to say the buyer has much advantage.
No seller loses a month of marketing except by personal choice. Many do not allow the home to be shown when under contract. Few agents know how to handle a back up offer properly. (Great question for sellers to ask a prospective listing agent: "Tell me how you would handle a backup offer once we are under contract." The answer should be unhesitating and lucid.)
Almost no sellers do an inspection on their homes, making all repairs prior to marketing, with the hopes that the buyer will miss stuff and seller will not have the expense and hassle of making routine maintenance repairs.
Sellers often do not disclose issues, sometimes even legally with "No Representation" on the form.
Many sellers do not have a property survey to share with buyers.
Most sellers do not offer maintenance records on systems.
A great many sellers have been in their homes for many years, decades even, yet feign shock at the list of stuff a buyer finds in a three hour inspection.
Yet, sellers are able to extract DD Fees from buyers just to agree to allow the buyer to have a few hours to examine stuff the sellers should know after years.
So, when the buyer gives the sellers $1000 nonrefundable, plus spends $500 on an inspection and $120 on a radon test, and $125 on HVAC assessment, and $400 on an appraisal, and walks away over $2000 in the hole because of stuff the seller hasn't bothered to maintain, Seller gets to cry. "Buyer Advantage?"
I don't really buy it.
Seller retains the intact asset. And maybe a reality fix on the buyer's dime.
Buyer is still homeless, with a fairly large outlay of funds to find stuff the seller is in denial on. Having a fair chance to escape a 30 year error because of seller failure to meet their responsibilities seems pretty doggone equitable to me.
All of this is so accurate. No way is DD a "screw over the seller" deal. Especially in a market like the one around here. Let's not forget that generally speaking; sellers are also buyers at the same time. They may be buying a home in a different state with a relocation; but mostly they are probably staying in NC and probably staying in the crazy Triangle market. I'm sure anyone who is selling a house and also buying one would not be so against DD.
All of this is so accurate. No way is DD a "screw over the seller" deal. Especially in a market like the one around here. Let's not forget that generally speaking; sellers are also buyers at the same time. They may be buying a home in a different state with a relocation; but mostly they are probably staying in NC and probably staying in the crazy Triangle market. I'm sure anyone who is selling a house and also buying one would not be so against DD.
I am currently doing both and I still say it's a disadvantage to the seller. My buyer's inspector found one item of concern to him, an item that has not ever been a problem in any way. I am the original owner & have been in the house for 9.5 years and have maintained & improved the property. The buyer's offer was OVER my asking price and came in as a single offer, not at a time of multiple offers. While I am waiting for the buyer to decide, I am on hold as I try to plan a temporary move, then a permanent move to another house, all with sizable deposits I might lose if my current house doesn't sell. And, yes we are negotiating, but in the meantime, the buyer asked for an extension because their mortgage company still hadn't ordered the appraisal! I have bought and sold houses in several states (former military) and have never run into such a system as this. There are better ways! I think NC should look for a better way.
I am currently doing both and I still say it's a disadvantage to the seller. My buyer's inspector found one item of concern to him, an item that has not ever been a problem in any way. I am the original owner & have been in the house for 9.5 years and have maintained & improved the property. The buyer's offer was OVER my asking price and came in as a single offer, not at a time of multiple offers. While I am waiting for the buyer to decide, I am on hold as I try to plan a temporary move, then a permanent move to another house, all with sizable deposits I might lose if my current house doesn't sell. And, yes we are negotiating, but in the meantime, the buyer asked for an extension because their mortgage company still hadn't ordered the appraisal! I have bought and sold houses in several states (former military) and have never run into such a system as this. There are better ways! I think NC should look for a better way.
None of this is actually an indictment of the DD Fee and DD Period in any way.
It is all a basic negotiation and execution discussion.
My layperson's opinion aligns with Mike's. Keep showing the house until you (or buyer's agent) has the check in hand. When you have the check, then listed it as under contract and stop showing it.
since it doesn't exactly apply to the OP ...
our MLS requires us to change status within 48 hours of going under contract (both parties signing the contract). What does that do to showings?
I certainly hope we'll see more "runnerup" offers willing to become backup offers, and then professional listing agents willing to get them executed.
Mike didn't mention ..... though I do assume his mandatory CE spoke to this .... the new idea of "courier" of the DD or earnest money check. Even if a Buyer has provided a check, until it has been delivered to the actual seller, if the buyer says "give it back!11!!" then now we have to give it back. Completely stupid, IMO.
I do believe we may start seeing some 8n) lawsuits over terminated deals. It'll be nitpicky as all get out but the reality (in my non-attorney opinion) is that 99% of Seller's technically default on contracts.
It pays to get experienced, intelligent, and well-read and versed representation. My professional experience is that when everything goes great,you don't realize (or care obviously) how much your agent truly KNOWS about the legalities and process.
I am currently doing both and I still say it's a disadvantage to the seller. My buyer's inspector found one item of concern to him, an item that has not ever been a problem in any way. I am the original owner & have been in the house for 9.5 years and have maintained & improved the property. The buyer's offer was OVER my asking price and came in as a single offer, not at a time of multiple offers. While I am waiting for the buyer to decide, I am on hold as I try to plan a temporary move, then a permanent move to another house, all with sizable deposits I might lose if my current house doesn't sell. And, yes we are negotiating, but in the meantime, the buyer asked for an extension because their mortgage company still hadn't ordered the appraisal! I have bought and sold houses in several states (former military) and have never run into such a system as this. There are better ways! I think NC should look for a better way.
this was supposed to be the better way.
Because frankly, buyers had pretty much until the closing day to back out and get their E$ back.
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