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Back in 2008, I remember hearing so many people, including those in real estate, lending, etc., say that although there is a real estate bubble, it won't affect us in the Triangle area because our homes appreciate 4% to 6% per year, not like Florida (they were appreciating DAILY).
I believed that and agreed with that.
We were all wrong.
So...I no longer believe anyone that predicts the housing market nor the weather!
I don't think I have said anyone should buy since about 2009-2010.
If then.
The "Great Time To Buy" outreach by NAR was pretty horrific
Now... The kids I am working with who want a greenhouse (could chickens be next?) probably need to be owners, particularly since their lease is going to go away...
The guy with the 135 pound wolfhound, an infant, and hopes for another, in 1300SF, needed to sell and buy.
Some people are in positions where ownership is logical, and it really is so hard for them.
My son made an offer on his first home today in a Raleigh suburb. The home is $200,000. The due diligence he offered was $1,000 with a $4,000 escrow. The seller countered with $4,000 due diligence and no escrow. Because the market is so hot, he was allowed 30 minutes to examine the home before the next potential buyers were ready to look.
There is no way I can see taking a chance on $4,000 due diligence without knowing whether there are serious mechanical problems with the house. (For the record, due diligence in a seller's market should not be allowed. If it is, it should be limited to one house payment.) It turns out that the sellers have two mortgages. They just closed on their newer house, so they're strapped for cash.
As a buyer, a seller strapped for cash is a potential red flag. If they don't have any money, have they kept up with the maintenance on the property they're selling? Did they move because there are serious but undisclosed problems with the current house? (The new house they bought was only $275,000.) Inquiring minds want to know.
What I'm trying to understand is what protection my son would have against losing a $4000 due diligence fee.
I just went back to the first post.....holy crap.
This was... BY FAR....the best chance your son had at getting a house.
If the quoted situation was an unacceptable situation for your son...then yes it is probably for the best that he has made other plans at this time.
If one of my clients could get a "counter" at all on any offer for a property that they really wanted...let alone one that has a $DD amount less than $5k......we'd both be ecstatic with glee.
Sadly, you two amaze me. You want the government to specify details of residential property transactions to infinite degree.
Geeee... Let's go full commie. I can rent from the government for life. Keep it fair!
Makes a DD fee look pretty palatable in comparison.
Not really. The DD fee seems somewhat unique to this state.
Quote:
Originally Posted by MikeJaquish
1/240th.
So, on a $400,000 listing, you would propose a legal limit of $1666/month rent/DD Fee.
Would you expect a daily pro rata, or just a monthly fee?
Gee...
I wonder how folks might feel about someone then writing a $480,000 offer on that $400,000 listing?
--with a small or no DD Fee
--with an $80,000 EMD
--a 3 day DD Period,
--AS IS, "Seller will make no repairs"
--closing in 22 days
--with an addendum stipulating buyer will pay contract price if an appraisal comes up short,
--maybe even a cash sale
--offering the sellers 6 weeks possession after closing for $1.00
DD Fee is hardly the only competitive factor in a successful offer.
An $80K DD fee says, "This is a strong offer and I'm willing to tie up cash to prove it."
A 3 Day DD period says "This is a strong offer, and I've got my ducks in a row to make this happen quickly."
(Theoretically,) couldn't one offer with $80K EMD, a 72 hour DD period, 22 day close, an addendum about the appraisal, AS IS, and still decide on hour 71 "Nope, this is a disaster with foundation concerns and major plumbing/sewer/septic problems" and get their $80K EMD back?
Not really. The DD fee seems somewhat unique to this state.
An $80K DD fee says, "This is a strong offer and I'm willing to tie up cash to prove it."
A 3 Day DD period says "This is a strong offer, and I've got my ducks in a row to make this happen quickly."
(Theoretically,) couldn't one offer with $80K EMD, a 72 hour DD period, 22 day close, an addendum about the appraisal, AS IS, and still decide on hour 71 "Nope, this is a disaster with foundation concerns and major plumbing/sewer/septic problems" and get their $80K EMD back?
Maybe they could, yes. But, that would be better for all involved than the buyer who walks on day 22 of a 23 hour period.
Would you consider the offer more risky, as a seller, than a lighter EMD and longer DD Period?
We got the DD Period concept from TX and GA, IIRC. It is a fantastic provision, compared to what it replaced. The totally unbalanced sellers' market perverts lots of stuff.
But, they have the blanks filled in on their standard forms with fixed, lower numbers. And, they have different definitions of terms and timelines.
So, an apples to apples comparison is hard.
NC Realtors Forms Committee Realtor members did not want a DD fee at all. The NC Bar Association attorney members of the forms committee forced it into the standard forms.
The Realtor members lost their argument that inspections, EMD, appraisal, etc expenses were adequate skin in the game.
Bar Association howled about "illusory contracts" if the seller had no cash in hand; even though that had never happened before.
To get agreement from the attorneys to produce the forms, the Realtors had to go along.
On top of all that, North Carolina is a strong Caveat Emptor state, and real estate conveyance follows that lead. Seeking transaction balance without market balance is hard.
He just put in an offer on a house listed for $200,000. He offered $212,000 and $5,000 due diligence fee. He lost the bid. He's now out of the market. The house is on a creek, the lot is a marsh, and the sides of the creek are eroding into the yard.
According to your original post, he was countered on another house and asked for a $4,000 due diligence fee, which he declined. Is he sorry he did that?
When due diligence fees started in NC we were told that just 100 a week or so was an adequate gesture. And about 1% earnest money. Even greater earnest money was a way to confirm you were serious. Then it all morphed such that the DDF needed to be high. Non refundable. The EM, people barely cared about it.
Back when DDF got started in NC buyers were beginning to put out offers on several houses at once, hoping one would pan out. The DDF made that more costly for those “gamers”. But now it’s become a way to lock the buyer in even if the house is a dud. If your DDF was 10K and the inspection reveals a new furnace is needed, well you may as well just accept it since the 10K already will pay for a new one, either way.
According to your original post, he was countered on another house and asked for a $4,000 due diligence fee, which he declined. Is he sorry he did that?
If your DDF was 10K and the inspection reveals a new furnace is needed, well you may as well just accept it since the 10K already will pay for a new one, either way.
I don't follow. The 10K goes to the seller. The buyer learns that a new furnace is needed. What does that have to do with the 10K that the seller received from the buyer? Negotiated repairs with the seller to save the transaction?
When due diligence fees started in NC we were told that just 100 a week or so was an adequate gesture. And about 1% earnest money. Even greater earnest money was a way to confirm you were serious. Then it all morphed such that the DDF needed to be high. Non refundable. The EM, people barely cared about it.
...
Yes. When the DD concept and DD Fee were introduced, a great deal of poor information was shared irrationally, and much of it by agents.
Last edited by MikeJaquish; 02-22-2021 at 04:15 PM..
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