Auctioneers vs. Realtors' "highest and best" (agreement, terminate, loan)
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In our NCAR Standard Offer to Purchase and Contract, we have a line for a "Due Diligence Fee."
Gotcha. We have a very similar clause in our GAR forms, but I have never, ever seen it used. The idea of throwing MORE money at a seller that they can keep if a buyer chooses to walk isn't an attractive one. What if the inspection uncovers a major flaw that the seller refuses to address? Now the buyer is out not only their inspection fees, but also a "due diligence fee"? Oh, hell no. As a listing agent, I can see where it would set a contract apart, but I can also see it being a huge bone of contention. "Well, you didn't disclose you had water damage!" "I didn't know, and besides, the sellers disclosure says 'to the best of my knowledge', so you can't hold me to it."
Possible scenario: Buyer pays due diligence option fee of $2,000. House is discovered to have radon of 25 pCi/L. Seller refuses to mitigate. Buyer walks. Seller then uses $2,000 to mitigate the home, and turns around and sells to a back-up offer that happens to be a better offer that came in after the first offer went binding . . .
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Location: Cary, NC
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Quote:
Originally Posted by dblackga
Gotcha. We have a very similar clause in our GAR forms, but I have never, ever seen it used. The idea of throwing MORE money at a seller that they can keep if a buyer chooses to walk isn't an attractive one. What if the inspection uncovers a major flaw that the seller refuses to address? Now the buyer is out not only their inspection fees, but also a "due diligence fee"? Oh, hell no. As a listing agent, I can see where it would set a contract apart, but I can also see it being a huge bone of contention. "Well, you didn't disclose you had water damage!" "I didn't know, and besides, the sellers disclosure says 'to the best of my knowledge', so you can't hold me to it."
Possible scenario: Buyer pays due diligence option fee of $2,000. House is discovered to have radon of 25 pCi/L. Seller refuses to mitigate. Buyer walks. Seller then uses $2,000 to mitigate the home, and turns around and sells to a back-up offer that happens to be a better offer that came in after the first offer went binding . . .
*shudder*
Yup. $1000 DD Fee. $500 Home Inspection + $150 Radon test. $$$Loan App.
$2000 is a common buyer investment. It is really tough for first timers who are counting the nickels, and one reason that new construction is so very popular vs. resales.
More than ever before, it is incumbent on a NC buyers agent to work very hard prior to contract to help paint a clear picture of property condition.
To get them to contract with eyes wide open.
I get under a lot of houses, into a lot of attics, and raise as many red flags as possible.
I'm not the home inspector, but my peek is free.
Did the "Ben Franklin" close with buyers this weekend prior to writing an offer.
Long list of both positives and negatives.
We wrote, and if we get an agreement, I sure hope we don't find a real deal breaker.
Yup. $1000 DD Fee. $500 Home Inspection + $150 Radon test. $$$Loan App.
$2000 is a common buyer investment. It is really tough for first timers who are counting the nickels, and one reason that new construction is so very popular vs. resales.
in NC, Earnest Money doesn't mean a thing until you've passed your Due Diligence period (inspection period). And our period is almost always at least 14 days, and up to 30 days. Earnest money RARELY becomes due the Seller.
It's my understanding that Earnest Money is refundable almost everywhere, for some period of time. Sometimes it's 7 days, sometimes longer. But there's still a period where it's not as important as Sellers like to think.
in NC, Earnest Money doesn't mean a thing until you've passed your Due Diligence period (inspection period). And our period is almost always at least 14 days, and up to 30 days. Earnest money RARELY becomes due the Seller.
It's my understanding that Earnest Money is refundable almost everywhere, for some period of time. Sometimes it's 7 days, sometimes longer. But there's still a period where it's not as important as Sellers like to think.
Around here (with no DD period), I can have earnest money refunded up until the day of closing (if the buyer never releases whatever contingency has already expired). Some, like home inspection, drop off on their own (assuming any negotiated repairs have been satisfied), or HOA/condo doc review (72 hour from buyer receipt).
Others, like financing, may continue up to the specified date in contract then continue on until either buyer releases it or seller requests it to be released. Most listing agents don't request it be released from my experience. Surely they're taking a risk on their sellers behalf.
I'll say what I thought per our contract - we have a 10 business day DD and after that expires if the buyer hasn't submitted a repair addendum then they have accepted the home as-is and they bailed they'd lose the EM. However, if any repairs were requested by the appraiser (ie-chipping paint on a VA loan) the seller would need to do those or the buyer can cancel the contract with no penalties and get the earnest money back.
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