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You will be amazed what I have to say about due dilligence fee (ddf)...
Recently I offered a house here in NC that was in the market for past couple of months. Sellers makes no representation on anything, everything no on checklist (He is selling house as it is)... and he doesn't have a single offer for this house, which we know for sure. when we offered, with 0 ddf, he counter offers with due diligence fee of $1000 for 20 days and $1000 for earnest deposit at time of agreement. So as a buyer, I have to risk $1000 dollar of ddf and $400 for inspection fee (total of $1400) just to see if that house is worth buying. What happens if that house is structurally deficient and seller not willing to repair it? Will I lose my 1400 dollars? If some issues surface during inspection, seller has now hidden interest not to fix it, as he has that 1000 dollar to keep. How much will you pay to a dealer to test drive a used car? What happens if appraisal comes below market price? How much will you pay to the owner of a used car so that you can take it to your mechanic? What is different here? Asking 1000 for 20 days? what happened here?
Do real estate board was smoking when they force this provision? I will be rather will go to a new builder and be confident what I will be getting.... with a warranty...
comments... ideas...
Last edited by rkatamaru; 01-27-2011 at 08:22 PM..
Reason: some typos...
You will be amazed what I have to say about due dilligence fee (ddf)...
Recently I offered a house here in NC that was in the market for past couple of months. Sellers makes no representation on anything (He is selling house as it is)... and he doesn't have a single offer for this house, which we know for sure. Now behold, he wants due diligence fee of $1000 for 20 days and $1000 for earnest deposit at time of agreement. So as a buyer, I have to risk $1000 dollar of ddf and $400 for inspection fee (total of $1400) just to see if I can buy a house. What happens if that house is structurally deficient and seller not willing to repair it? Will I lose my 1400 dollars? If something comes into inspection, seller has now hidden interest not to fix it, as he has that 1000 dollar to keep it. How much will you pay for a test drive of a used car? How much will you pay the owner of a used car to so that you can test it with a mechanic? What is different here? Asking 1000 for 20 days? what was he thinking?
Do real estate board was smoking when they force this provision? I will be rather will go to a new builder and be sure what I am getting.... with a warranty...
comments... ideas...
1. It is always unfortunate when a consumer does not understand and/or does not have a capable agent to explain things clearly.
2. As far as any governing body is concerned, a DD fee is not ever required, but is a negotiable item in a transaction. And, no one is making anyone use the standard form. You retain the right, always, to have an attorney draft an offer and contract to suit your needs.
3. No amount of DD Fee, or Earnest Money Deposit is established by any governing body.
4. If you agree to a DD fee, it is hardly at risk. More accurately, it is gone. Non-refundable, unless there is a material adverse change in the condition of the property (fire, tornado, etc.) or the Seller cannot deliver insurable and marketable title.
5. If you cannot get to contract with terms and costs that are agreeable, no one is making you do anything, including buying the property under terms you find unacceptable.
6. It is all negotiable: DD fee and period, Earnest Money Deposit amount and timing of delivery.
7. It is a great document, IMO, and we will find REALTORS and consumers making it as hard as possible out of ignorance. Such is the way of the world....
As a matter of fact I have a capable agent working for me. And I was told that by my agents that if you have an agent you MUST use this document. Yes, I understand that it is not required but just there is a space for DD fee, people (including sellers and others) started thinking that some money should be there. For your point on number 4, if that property turned out not as advertised, you will lose your DD fee, read section 8(i) and 12. One says clearly you will get it back only when if seller could not get his title on order or house caught on fire before closing.
As a matter of fact I have a capable agent working for me. And I was told that by my agents that if you have an agent you MUST use this document. Yes, I understand that it is not required but just there is a space for DD fee, people (including sellers and others) started thinking that some money should be there. For your point on number 4, if that property turned out not as advertised, you will lose your DD fee, read section 8(i) and 12. One says clearly you will get it back only when if seller could not get his title on order or house caught on fire before closing.
There are several spaces in the Standard Offer to Purchase that are filled in routinely with "N/A," and DD Fee and EMD at contract and EMD later are certainly among them.
Agents do NOT have to use that form. It is the property of NC Association of Realtors.
Licensed agents who are not members of NCAR do not have the right to use that copyrighted form.
NC Realtors must use that form to represent a client. Consumers do not have to use that form or format to buy and sell. They ALWAYS have the right to escalate their representation level to an attorney, including preparation of offers and contracts. No agent can deny that right to a consumer in NC.
Bottom line:
The form is excellent and easy to use, with fairness actually tilted toward the Buyer, IMO. Most Sellers and listing agents currently will tell you the same thing.
It appears you are blaming the form for negotiations that are not going the way you want them to go.
Further, you have an agent.
If you don't trust your agent's guidance, talk to the broker.
If you can't get acceptable guidance there, go to an attorney.
Good advice and information Mike. The educated and experienced agents have no qualms with the form and are able to advise their buyers and sellers correctly because they are professionals.
The others will complain and plant doubts in the minds of buyers and sellers from the git go; and that is how rumors and incorrect information is passed on to the public (to agents' detriment). Sellers always get a sample copy of the OPC at the time of listing, and the agent should go over it with them to make sure they understand whenever they have questions.
There were more problems with the 2008 and prior forms with the Alternative 1 and 2 and ambiguous language with which agents had problems with interpretation for the same reasons, lack of study.
As always, the folks need an experienced informed agent that use the changes best to represent their buyers or sellers, not to plant doubts.
Last edited by QuilterChick; 01-28-2011 at 06:46 AM..
Reason: punctuation
We've had our "Option Period" here in TX for years and it's just business as usual. Too bad NC decided to name their Option Period Fee a Due Diligence Fee, sounds like the name confuses a lot of people.
Our contracts allows you to put up an amount (negotiated) for a short time period (usually 7-10 days) to terminate the contract for any reason. It is designed as a period to do inspections & negotiate repairs. The ability to terminate is a big incentive for a seller to cooperate on repairing or addressing major repair issues.
I'm not a lawyer but I understand anyone who purchases an Option Period must put up some reasonable amount of money for that option. Too bad NC didn't call their DD time an Option Period with the unrestricted right to terminate. To me, it's easier to understand and covers more then just Due Diligence.
The blanks are there. Buyer wants low due diligence fee. Seller wants higher due dilligence fee. It is NEGOTIATED until both parties agree or buyer moves on.
Did another offer. House priced $142,000. I have buyer...first time buyer...she offered $150 Due Diligence Fee with 30 days and earnest money deposit of $1,000. She is getting loan with BB&T and is going with 100% financing. BB&T's CHIP program. Great program.
Quick question (is there any such thing). Do you foresee a glitch, where there would be nail biting with the 30 to 45 day closing dates and the due diligence period is too close, papers/title not ready etc. etc. Murphy's Law. Then the buyer needs to put up an additional amount to extend, correct?
If you have a seller that needs to move within 40 days, let's say, he may be vacating without knowing if there will be a closing, is that right? Does the due diligence clause as it is currently make a smoother/neater transaction for the seller?
Are you doing more lengthy closing dates to cover the squeeze situations? Of course, in this economy, I would think that the banks would pull the new business in the door sooner.
[quote=QuilterChick;17623404]Congratulations on your pending sale![/]
Yes, indeed!
Quote:
Quick question (is there any such thing). Do you foresee a glitch, where there would be nail biting with the 30 to 45 day closing dates and the due diligence period is too close, papers/title not ready etc. etc. Murphy's Law. Then the buyer needs to put up an additional amount to extend, correct?
The whole point is to accelerate buyer and seller preparation for a contract so some of the requirements are met before buyer even sees the property. Buyer thoroughly vetted for preapproval, and more impetus on seller to get the property ready.
However, we have been doing more 45 day closings already, so this change is less of a shock.
Additional EMD would be a negotiable point, and the reason for extension and confidence of either party would play into it. And, there is a 14 day period after proposed closing date where there is no penalty for a delay (I hate saying that publicly.)
Quote:
If you have a seller that needs to move within 40 days, let's say, he may be vacating without knowing if there will be a closing, is that right?
Seller is smart to ask for some time between DD period expiration and settlement to move out, so contingencies are off the table prior to move out. But, if the Seller needs to move, the DD period is a little moot anyway. Of course, it is not an issue in an unoccupied home.
Quote:
Does the due diligence clause as it is currently make a smoother/neater transaction for the seller?
I think it is cool to wipe all Buyer contingencies but title and property in equal or better condition out at one date.
Quote:
Are you doing more lengthy closing dates to cover the squeeze situations?
I am talking to the lender more.
Quote:
Of course, in this economy, I would think that the banks would pull the new business in the door sooner.
For sure. Foreclosures are more prevalent now which causes more pain and suffering for all concerned; short sales are the worst nerve wracking experiences according to my buddies who haven't been lucky enough to retire yet.
I've read and re-read that DD clause -- sometimes it sounds like it favors the sellers, but more so favoring the buyers. It did eliminate some confusion and eliminated some dreaded addendums; so we'll see how it shakes out in the long run. That 14 day "no penalty" delay after proposed closing date is weird; after all the harang, I wonder if "time is of the essence" will end up in there at some point.
Have a profitable weekend y'all.
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Do you foresee a glitch, where there would be nail biting with the 30 to 45 day closing dates and the due diligence period is too close, papers/title not ready etc. etc. Murphy's Law. Then the buyer needs to put up an additional amount to extend, correct? 
