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Same here. I'm happy we don't have to deal with buying a DD period. From the outside looking in it seems like unnecessary clutter to the contract.
agreed
Quote:
Originally Posted by Brandon Hoffman
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.
That's how I read it, as a subject to repair in an appraisal
the FHA/VA Addendum overrides all .... which is the reason in a competing offer situation your Buyer likely won't get the house in NC.
do folks get an appraisal within 10 days in other states? Perhaps the system there is conditioned to make this happen that fast - and make it through underwriter review to boot.
in NC, it's basically written so the Buyer gets ALL the tasks - inspection and appraisal chief among them - done within the DD period, and any amendments/changes made within the period. Be that for appraisal or things that both agree will be fixed or agreed by monetary adjustment at closing.
And yes, should the Buyer let the period expire without action, they're accepting the property without issues of repair or appraisal.
A Seller doesn't have to fix anything at all. If the house doesn't appraise, the Seller doesn't have to agree to accept anything less than contract price. Do they agree? Often/usually.
I always try to look pretty carefully at the contracts I can from other states (when I have clients moving to/from other states). There are 3 observations:
1. They all have significant differences between each other in the treatment of Earnest $/inspection periods/timelines.
2. They all treat the period between offer/contract and "Buyer can back out and get their Earnest Money" differently, both in time allowed and who gets the power to terminate and when.
3. None of them have been perfected yet (as a reader of the printed word, not a someone who's ever been involved in contract disputes at this level).
So, coming back to the OP ... there's so much difference between contract performance from state to state that auctions will represent a very small % of sales for a long time. 5 investors looking to pay cash and close in 2 weeks so they have a new investment property? Every one of those could be sold at auction.
Same here. I'm happy we don't have to deal with buying a DD period. From the outside looking in it seems like unnecessary clutter to the contract.
Actually, like many features of the NCAR Offer/Contract a DD Period is not mandated.
It is a negotiable point and a much simpler contract than we had in the past.
10 years ago, we spent a lot of time arguing language points in the contract, "serving its intended function," and other vague mumbo jumbo when termination and refund of EMD were in play. There were a lot of frivolous complaints from buyers and sellers and their agents that sprung from poor language in the forms that set terms of contract.
NCAR took the tack of providing a framework for a contract, with the implication that agents and consumers would recognize the need to work as adults.
Now it is cut and dried. Consumers and Agents determine the terms of contract.
I actually like it a lot. I don't ever feel like my hands are tied by the standard form provisions, but feel like we have more clarity in a transaction.
Yes, sellers abuse buyers by not prepping the house for sale, "dissembling" on disclosures, and then they cry "Foul! I hate the stupid DD Period," when buyers find out they went to contract on lipstick on a pig and walk.
Too many sellers and agents like to use DD Fees and EMD as leverage when presenting a lipsticked pig.
But, smart buyers are more careful about going to contract because they end up with a fair amount of skin in the game.
And good buyers agents work harder in discovery prior to contract. But that is just as it should be in any market, under any terms.
I would just like to see more balance in the local market, which would put downward pressure on DD Fees, and encourage more sellers to be pre-marketing proactive.
Another fun point:
The Offer/Contract is now longer than ever.
Since REALTORS® can be lax, can fail to read paperwork, NCAR felt the need to insert detailed instructions to consumers into the forms' 2017 revisions, highlighted by being placed inside a blue-outlined box.
It is embarrassing as hell to have to tell prospective clients that those instructions are there for them because too many REALTORS® don't understand, or don't explain, what they are asking the consumer to sign
Last edited by MikeJaquish; 11-15-2017 at 04:36 AM..
Interesting...The "highest and best" or "BAFO" doesn't seem that different than certain RFP procedures seen in the corporate world, or sealed bid procedures that some companies utilize, none of which are auctions.
Real estate can be auctioned in all 50 states, no?
If buyers and sellers wanted to go this route, it is available to them. An auction by definition is transparent, at least as far as the what the current high offer is. The lack of transparency, and the nuances involved in the strength of an offer such as cash vs. finance, a buyers need to sell his house first, due diligence period, etc, make an auction a sub-optimal means of selling residential real estate. If potential buyers knew all the details of their competitor-buyers, then maybe the Auctioneers would have a case. But even then, the seller still has the option to evaluate offers on their merits outside of total offer price. What one seller feels is an acceptable amount of risk for a higher offer with more contingencies and room for the deal to sour might be different than his neighbor.
In our NCAR Standard Offer to Purchase and Contract, we have a line for a "Due Diligence Fee."
The boys at the Bar Association screwed up the forms. And, ignorant agents screwed up the process.
When they were revised several years ago, the NCAR Forms Committee prevailed on the NC REC to allow a "Due Diligence Period" in the Standard Forms.
That started the Great Debate...
Was it necessary for the buyer to give money, to have specific skin in the game, to avoid an illusory contract?
Or, would the investment in due diligence, inspections, appraisal, loan application, be adequate to avoid possible voiding of a contract for a lack of money crossing hands?
Opinions were evenly split, and form development was halted.
Compromise:
Provide a field for an Optional, negotiable, and non-refundable Due Diligence Fee to be paid directly to the Seller, and to be credited to Buyer at closing.
Even with language in the form stipulating that the contract would be legit even without a DD Fee, we have suspenders and a belt in the language.
The full intent was a $10 or $20 fee to meet a minimal "skin in the game" requirement.
Ignorant agents prompted their sellers to hold that the fee should cover their house payment, dining out, whatever. Since they have been misled by weak agents that they were "taking the house off the market," sellers agree readily.
Now, in this sellers market, we see $1000+ fees routinely. If you want that house, and you are financing, vs. cash offers, boost it to $2000 or $3000.
Non-refundable, except in case of proven seller breach. Good luck with that.....
The hoped for outcome was that sellers would make repairs, do pre-listing inspections, clearly disclose, etc.
IOW, properly prepare the house for market.
For $3000, buyers should get a survey, appraisal, inspection report, repairs, and a professionally presented property.
We have sunk to just stinging buyers, rather than any sense of market fairness.
I tell my buyers that they first have to "buy a contract." Then go find all the stuff the seller didn't disclose.
If this market pendulum ever swings the other way, we will see buyers saying, "Take a $10 fee and be glad I don't steal your dog."
When it comes to whatever it is that you're referring to as the so called "Great Debate", Are you sure the "great debate" isn't only in your head, Mike?
Who else is really trying to argue this stuff??
Quote:
Originally Posted by KJMoves
Why? I'd like to understand better why are 'seriously frowned upon' or even considered violations in some states...
I think you must not read Mike's posts much. You see, he has the tendency to often present his opinions, or fantasies even, as fact.
Then when you ask him to back up anything he says, he will most likely ignore you altogether, as witnessed, or he will present you with more of his garbled opinion in a factual manner.
Good luck getting a straight answer though
Last edited by riggy_house; 11-17-2017 at 08:23 PM..
you're not in NC, nor do you hold a real estate license - unless you've withheld that from us.
It was a conversation among licensees in different parts of the country. It has nothing to do with you, your understanding, your buying of real estate, etc.
I might professionally disagree with Mike on what the intent of Due Diligence was (we're in the same market, if you didn't know) and how much it should be (pittance vs 'value of seller's time"). I don't think he - but hey, he might! -
considers me ignorant for not agreeing with him on this point.
I would agree that if a Seller expects to be paid for their time (and for all intents, the house IS considered off the market by showing agents), then they should invest time upfront where the buyer won't have to worry about major undisclosed/unknown repairs.
But we do happen to be in agreement on the reasoning - in NC - of the legal folks above us that have actively discouraged the industry from using escalation clauses. We've covered in previous topics that I believe riggy has appeared in WHY this is the position in NC.
But we do happen to be in agreement on the reasoning - in NC - of the legal folks above us that have actively discouraged the industry from using escalation clauses. We've covered in previous topics that I believe riggy has appeared in WHY this is the position in NC.
Coincidentally, on the topic of escalation clauses, MAR just released a standardized addendum form to use when employing that strategy, which also outlines what it is & how it should be used. I believe it's a response to the market we've experienced these last 2-3 years which has been extremely difficult for buyers. I know we're not alone in that regard, but it has not been uncommon to repeatedly submit offers numbering in double digits for buyers, most (or all) of which are in excess of list prices, without success.
There is quite a bit of cautionary language included, not the least of which instructs the buyer to consult legal counsel. I haven't decided if I'll use it, but I may, and I'm glad they've put their endorsement behind it.
you're not in NC, nor do you hold a real estate license - unless you've withheld that from us.
It was a conversation among licensees in different parts of the country. It has nothing to do with you, your understanding, your buying of real estate, etc.
I might professionally disagree with Mike on what the intent of Due Diligence was (we're in the same market, if you didn't know) and how much it should be (pittance vs 'value of seller's time"). I don't think he - but hey, he might! -
considers me ignorant for not agreeing with him on this point.
I would agree that if a Seller expects to be paid for their time (and for all intents, the house IS considered off the market by showing agents), then they should invest time upfront where the buyer won't have to worry about major undisclosed/unknown repairs.
But we do happen to be in agreement on the reasoning - in NC - of the legal folks above us that have actively discouraged the industry from using escalation clauses. We've covered in previous topics that I believe riggy has appeared in WHY this is the position in NC.
If you don't know what something means
I love how you protect and defend Mike's words, even when you clearly disagree with his bs.
You're a good friend to him, and I hope he can learn something from you.
I also love how neither one of you can offer any facts whatsoever when it comes to supporting your opinions as to why NCAR is so highly against the use of escalation clauses, as you both would like us to think.
he's provided a link, or at least the verbiage, straight from the folks in charge of such matters.
I'm not a "good friend" to Mike - we've met once, and never sat on opposite sides of a transaction.
The fact remains that you are not in NC and you are not a licensed agent in any state in the US. The discussion was among professionals about AUCTIONS.
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