Raleigh, Durham, Chapel Hill, CaryThe Triangle Area
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Yes, of course DD money goes towards the closing, but I still think it's just crazy thing to have. There should be an upper limit for it, in my personal opinion. It's easy to say 50K will go back to you. Yes, of course, the current value of that 50K will go back to me. But, how about the future value of that 50K? It takes about 30-45 days to close. If I am a hard money lender or do day trading, no way I'd be willing to just let that 50K sit doing nothing for possibly 45 days, just because it signals my willingness to purchase this house. It just not a smart way of looking at money.
We're working to finalize job offers from out of state that have dragged on absolutely endlessly (was originally planning to list MONTHS ago!). Really hoping we get things squared away so we can sell while the market is this hot.
Think we're going to rent in our future location for a bit to see if we can ride this out. Even the place we are moving is apparently moving fast and this is a great plains state where supposedly NOTHING moved fast ever before. I can't imagine this is sustainable. I don't know how many homes are caught up in the foreclosure moratorium. If it is a meaningful number, there may be a massive amount of inventory hitting the market in fall once the banks suddenly own a bajillion houses they don't want. Or it could be a more modest number and supply is just choked by people not wanting to sell during a pandemic and increased supply costs for building.
Yes, of course DD money goes towards the closing, but I still think it's just crazy thing to have. There should be an upper limit for it, in my personal opinion. It's easy to say 50K will go back to you. Yes, of course, the current value of that 50K will go back to me. But, how about the future value of that 50K? It takes about 30-45 days to close. If I am a hard money lender or do day trading, no way I'd be willing to just let that 50K sit doing nothing for possibly 45 days, just because it signals my willingness to purchase this house. It just not a smart way of looking at money.
How would you set or enforce such a rule?
The "Due Diligence Fee" is just a concept in the NC REALTORS Standard Form 2-T, Offer to Purchase and Contract. Plenty of real estate transactions happen without that form being used.
If I see a house I want, and I want to be competitive in the marketplace, how would you write a rule or law to prevent me from using a different Offer/Contract form and giving a huge "Non-Refundable Deposit" at time of contract?
Builders do it all the time with their proprietary contract forms. A few years ago, clients had to give $100,000 nonrefundable to get a new construction house contract.
How would you set or enforce such a rule?
The "Due Diligence Fee" is just a concept in the NC REALTORS Standard Form 2-T, Offer to Purchase and Contract. Plenty of real estate transactions happen without that form being used.
If I see a house I want, and I want to be competitive in the marketplace, how would you write a rule or law to prevent me from using a different Offer/Contract form and giving a huge "Non-Refundable Deposit" at time of contract?
Builders do it all the time with their proprietary contract forms. A few years ago, clients had to give $100,000 nonrefundable to get a new construction house contract.
Is NC the only state that has this f***ery? It just seems insane. I do not want to enforce any rules. I just think this DD is crazy. Why can't we be like everywhere else with earnest money that's non refundable after a certain date? Why do we also have to have DD money?
Is NC the only state that has this f***ery? It just seems insane. I do not want to enforce any rules. I just think this DD is crazy. Why can't we be like everywhere else with earnest money that's non refundable after a certain date? Why do we also have to have DD money?
I think you could write an offer in any state with any amount of non-refundable money a buyer and seller would agree on.
And, people in other states are no happier than we are.
That fact is borne out on the CD Real Estate Forum every week.
Sans the DD mechanism and period, people fight over EMD all the time. We used to, and the DD Period and Fee pretty much fixed that.
I think the issue would be what a reasonable expectation of repairs would be. And of course, a Buyer's deposit accounts.
If all Buyers went into a contract thinking "I'm going to need an extra 3% just for uncovered repairs", that would be the best way.
and of course, the reality is that few if any things that are going to show up on an inspection, as opposed to your own visual viewing of the home, are going to affect the appraised value one bit. An appraiser doesn't say a house with a brand new $10K HVAC is worth $1 more than the comp with a 15 year old HVAC.
I'm telling my buyers to back their searches even further down from the maximum.
1. To have working cash for repairs.
2. In case the appraisal is short.
Of course, the lower you go, the more competitive it is.
And, there would be nothing to prevent a cash buyer from providing 100% of contract price with the offer, contingent only on delivery of insurable and marketable title.
Ok. Let me see if I can make this easier to understand...
Due Diligence Fee goes directly to the seller at contract. Seller cashes or deposits check. It is seller's money UNTIL CLOSING.
If buyer decides NOT to buy the house for a reason or no reason and there is no closing, Seller keeps due diligence fee.
If buyer and seller go to closing, DUE DILIGENCE FEE is CREDITED back to buyer.
You and I certainly have no trouble understanding the concept of $DD....
My point is that to the typical consumer; especially a first time buyer who is used to signing leases... saying "you get the Due Diligence money back at closing!" can easily be interpreted as "pay this money now; and when you close on the house; we're gonna give it back to you". a la a security deposit. Sure, TECHNIICALLY that's true; it's going to show up as credit on their ALTA statement....and yes in theory if their $DD amount were to be higher than that of their closing costs and downpayment % ; they could walk away with a check. In the overwhelming majority of transactions that is not going to be the case...especially for someone buying their first home.
I think it is fair to assume the buyer in this $100k DD $250k EMD scenario wasn't purchasing a property for the first time. I do however think that was as agents should be mindful of how we describe certain aspects of the homebuying process to our clients/consumers in general.
You and I certainly have no trouble understanding the concept of $DD....
My point is that to the typical consumer; especially a first time buyer who is used to signing leases... saying "you get the Due Diligence money back at closing!" can easily be interpreted as "pay this money now; and when you close on the house; we're gonna give it back to you". a la a security deposit. Sure, TECHNIICALLY that's true; it's going to show up as credit on their ALTA statement....and yes in theory if their $DD amount were to be higher than that of their closing costs and downpayment % ; they could walk away with a check. In the overwhelming majority of transactions that is not going to be the case...especially for someone buying their first home.
I think it is fair to assume the buyer in this $100k DD $250k EMD scenario wasn't purchasing a property for the first time. I do however think that was as agents should be mindful of how we describe certain aspects of the homebuying process to our clients/consumers in general.
Definitely, Nick! According to my husband, I'm much more concerned with my buyer's money than his!!!
I find the best way to describe all of this to buyers is to give them best case/worst case scenario.
Funny that we had this same conversation at my office today. Buyer's due diligence is a huge concern to any agent that truly has their buyer's best interest at heart.
Another concern we were discussing is docusign. My concern is that when I docusign to my buyers/sellers, they don't read what they are signing. In the "olden days", we'd meet at office or their home and I'd go over the contracts they were signing, hitting on the important paragraphs. Used to take me about 30 min. to 45 minutes. Nowadays, I send the docusign to them and before I can even get a glass of water, it is back, signed.
We're working to finalize job offers from out of state that have dragged on absolutely endlessly (was originally planning to list MONTHS ago!). Really hoping we get things squared away so we can sell while the market is this hot.
Think we're going to rent in our future location for a bit to see if we can ride this out. Even the place we are moving is apparently moving fast and this is a great plains state where supposedly NOTHING moved fast ever before. I can't imagine this is sustainable. I don't know how many homes are caught up in the foreclosure moratorium. If it is a meaningful number, there may be a massive amount of inventory hitting the market in fall once the banks suddenly own a bajillion houses they don't want. Or it could be a more modest number and supply is just choked by people not wanting to sell during a pandemic and increased supply costs for building.
Weird times are getting weirder.
randomly ....
If you're not moving to Idaho or Utah, it shouldn't be that crazy (and CO doesn't count, because they HAVE been crazy before).
It's not a foreclosure moratorium per se, it's a mortgage forbearance. Last I looked it was ~2MM of ~180MM homes.
If you were about to be foreclosed on in February 2020, there's probably truly not much help for you. Between unemployment rates and appreciation rates, you could have been the slightest amount of proactive and sold your home for more than the mortgage owed.
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