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In North Carolina, using the NCAR Standard Offer to Purchase and Contract, financing concerns are included functions of the Due Diligence period. Ergo the DD Period is usually longer than in other states. http://www.ncrealtors.org/uploads/sample-2-T.pdf
We have no appraisal or financing contingencies stated or spelled out in the Offer to Purchase and Contract. Appraisal and loan are part of Buyers' Due Diligence.
So are contracts longer than before, or do sellers assume all will go smoothly? I know that nothing is definite until the money is there, but at least with the old way, the other contingencies were removed earlier and the buyer actually had some sort of commitment after a couple weeks. With this, the buyer's only commitment is a $200 fee, as even the earnest money is refundable for any or no reason.
We'll have to ask for more time after the dd date, so that we aren't committing to a purchase and cross-country move before we know if our house is sold. I have two concerns:
1. They could find something they like better and cancel.
2. They might not get the loan. (borrowing 100% and asking us to pay closing costs and inspections - do these people have any money at all? Is this 2006?)
So are contracts longer than before, or do sellers assume all will go smoothly? I know that nothing is definite until the money is there, but at least with the old way, the other contingencies were removed earlier and the buyer actually had some sort of commitment after a couple weeks. With this, the buyer's only commitment is a $200 fee, as even the earnest money is refundable for any or no reason.
It does seem like a very long time for a buyer to walk away for no reason. I prefer the way we do ours... approx 7-10 days for inspection option, about 14-20 for buyer to get financing commitment which then only leaves the appraisal. Our contingencies are whittled down and eliminated in a much shorter time.
Yes it does sound like you are back ro 2006. With no money down and no cash, you have a very weak buyer and personally I would be concerned. I've never ever seen a buyer ask for a seller to pay for their inspections.
We got an offer on our house!
I'm going to read it in detail now, but I want to get my question on here. (Yes, I have a realtor, but . . . )
The buyer has asked for a due diligence period ending May 31, with a closing date of June 8. Is it true that they can back out for any reason up until May 31?
In all of our past transactions (NC and other states) there have been removal dates for each specific contingency - with all of them much earlier than that. Our agent tells us this has changed with the new due diligence law, and "That's how it is now."
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Thanks.
Your Realtor is correct. For my sellers I insist on at least a 500 Due Diligence fee which is paid to the seller upon contract acceptance. If the buyer is serious and intends to conclude the purchase they should have no problem with the fee. If they purchase the fee is deducted from the sales price. With the lag time on loan commitments it is reasonable for a buyer to ask for 30 days DD because if the loan is denied and the DD date is past he still loses his earnest money to the seller. Depending on the lender it caould take 40-45 days to close on a loan. The buyer needs some protection of their earnest money, therefore the DD date.
Your Realtor is correct. For my sellers I insist on at least a 500 Due Diligence fee which is paid to the seller upon contract acceptance. If the buyer is serious and intends to conclude the purchase they should have no problem with the fee. If they purchase the fee is deducted from the sales price. With the lag time on loan commitments it is reasonable for a buyer to ask for 30 days DD because if the loan is denied and the DD date is past he still loses his earnest money to the seller. Depending on the lender it caould take 40-45 days to close on a loan. The buyer needs some protection of their earnest money, therefore the DD date.
People will walk away from $500 just as easily as $300 or $100 if they decide they are making a $500,000 mistake.
Due diligence fee of $50 is adequate. Due diligence fee of $1000 is adequate.
Buyer should be preapproved by a lender to the point that all they need for underwriting is a contract and an appraisal. That allows a shorter period, and makes the buyer better prepared to close.
Then the buyer can justify a lower DD Fee.
Seller should prepare the home for market properly, provide a survey, preliminary title search, inspection with all repairs completed by licensed tradespeople, documented and warranted.
Bringing that value, seller can justify a higher DD Fee.
When buyer and seller are properly prepared to function in the real estate market, the DD Fee amount is rendered much less material.
I doubt that would work in my market. $500 earnest money it typical in most transactions from 100K to 200K. Trying to get that as a DD fee would get a lot of push back. We are still seeing no DD fee for most transactions here. We do 95% VA and FHA loans out.
We got an offer on our house!
I'm going to read it in detail now, but I want to get my question on here. (Yes, I have a realtor, but . . . )
The buyer has asked for a due diligence period ending May 31, with a closing date of June 8. Is it true that they can back out for any reason up until May 31?
In all of our past transactions (NC and other states) there have been removal dates for each specific contingency - with all of them much earlier than that. Our agent tells us this has changed with the new due diligence law, and "That's how it is now."
Thanks.
First of all, 3 1/2 months of DD is waaaaay to long. I think a month is pushing it.
Correct, buyer can walk at anytime during DD and get their EM back. Once the DD has passed, EM is locked in and buyer has few options to get EM back. So buyer is always going to push for a longer DD. You will not have any showings during DD even if it remains listed as active.
Agree with MJ, financing is the main issue. If DD passes and buyer cant get financing the buyer will lose their EM as well. However, the buyer has more control over their financing than the seller. If a buyer needs a long DD to hedge their bet on financing, then that buyer is a weak financial prospect. Sure, if a buyer passes their DD and cant get financing they lose their EM. But if the buyer walks after a month the seller has lost a month and incurred significant financial damages. This where negotiations come into play.
One other option is to consider a phased in EM. It does not have to be one lump sum. If financing is their only concern, you could have buyer add more DD or EM after they have inspected which should not take more than 2-3 weeks. Then have final installment of EM once financing is complete (no more than a month).
Wow, first of all getting a contract now with a close date in June is crazy!! Is that typical of your market? Here in Co, you're lucky to get 60, most are 30-45 depending on loan situation.
Second, I'm guessing due diligence is different in each state. Here, the realtor puts in the deadline, and it's usually 2 weeks after contract acceptance (the deadline to object).
Third, due diligence fees??? Wow! I have never heard of such a thing.. just goes to show how different things are in each market. Now, is a due diligence fee the same as earnest money? Here the average depends on the price of the house, but typically a few thousand dollars..
Wow, first of all getting a contract now with a close date in June is crazy!! Is that typical of your market? Here in Co, you're lucky to get 60, most are 30-45 depending on loan situation.
Second, I'm guessing due diligence is different in each state. Here, the realtor puts in the deadline, and it's usually 2 weeks after contract acceptance (the deadline to object).
Third, due diligence fees??? Wow! I have never heard of such a thing.. just goes to show how different things are in each market. Now, is a due diligence fee the same as earnest money? Here the average depends on the price of the house, but typically a few thousand dollars..
Due diligence is pretty much a package deal here.
Appraisal, inspections, survey, all rolled into one. It actually is a pretty cool provision, with fewer deadlines for either party to note.
DD Fees run from $0.00 to whatever is negotiated.
Of course, there is no DD Fee on short sales, foreclosures, estates, relocation company sales, new construction, and sometimes on resales.
$200.00 is not uncommon on resales. And lower is warranted on properties where the buyer and seller agree that seller will make no repairs to the property.
As we trend into a sellers' market here, I expect more pressure on buyers to raise DD Fee amounts.
DD Period ending in May, and closing in June?
It's not typical, and not odd. Just the art of the deal. It has to work for both parties. I would expect the seller to be looking for a huge DD Fee, or to decline if there is time sensitivity and urgency.
First of all, 3 1/2 months of DD is waaaaay to long. I think a month is pushing it.
Quote:
Originally Posted by azcater
Wow, first of all getting a contract now with a close date in June is crazy!! Is that typical of your market? Here in Co, you're lucky to get 60, most are 30-45 depending on loan situation.
the OP was from 2012...
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