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Well, you know, there is the Repair OPTION. And of course, the amount for the repair contingency. And most agents will explain that there are certain things that the seller MUST repair or the buyer gets his money back and walks away. It doesn't seem like a huge gamble to me and I work more with buyers than sellers.
If the seller continues to take "back up offers" after the contract with the buyer is signed, the buyer runs the risk of having a better offer come in and when the home inspection comes back, the seller may not want to do any repairs in hopes that the buyer will take his EMD and walk away.
I think going into contract puts both buyers and sellers into a stressful situation and thats why you should allow the agents to handle this for you!
A good agent will write the Offer To Purchase weighted in your favor. For example: ALWAYS make the offer contingent on the property appraising at or above offer price. ALWAYS contingent on passing inspection, with a cap on repairs. (Cost of repairs can't exceed certain dollar amount). Then when the inspection comes back make a list of requested repairs and if they don't fix them you walk away from the contract. You've still lost the cost of the inspection and the appraisal but you aren't stuck buying the house if you don't want it.
But, it does seem like a bigger gambling buying an older house in NC because of the lack of cooling off or the inability for a buying to back out during the inspection phase because they didn't like what the inspection found.
I can only speak from the experience of buying my home in NC, but my understanding is that you do have the option of backing out during the inspection phase under certain circumstances. Like you mentioned in your post, in our contract to purchase our house we had an appraisal / inspection contingency that stated if the house did not appraise to equal or greater than the purchase price or if the inspection uncovered repairs needed in excess of $1,500 we could walk away from the deal and get our earnest money back. The seller had the option of making the repairs which would be fine, but if that $1,500 threshold was tripped we could walk away whether he wanted to make the repairs or not. That protected us from any unforeseen issues with the house that should have been factored into our offer price. I think this kind of contingency is pretty common here. I don't think the market is "hot" enough here for sellers to be rejecting offers that have appraisal/inspection contingencies on offers. Sure some might try, but I would not buy a house under those circumstances.
I think sellers take on just as much risk as the buyers if not more. They are pretty much taking their house off the market once they go under contract with the buyer. Sure it would be wise to take back-up offers, but if they don't and the buyer backs out on the 29th day before closing, where does that leave the seller (For the record...I would never actually do that!). Now the seller's house is a "stale" listing and other legitimate buyers for their house may have already committed to another property by this time. Sure the sellers are entitled to the earnest money, but in many case that is only a few thousand dollars....not very much compensation. Sure the sellers could try to sue the buyers for breach of contract, but they would have to keep there house off the market during litigation further delaying the sale of their home. Probably not worth it in the long run.
I think it is much easier for a buyer to sue a seller who wants to back out of the deal than the other way around. Lets face it.... no matter what, you can't force me to buy your home. But if there is a valid contract and the seller wants to back out....you have a pretty good chance of suing them and getting them to honor the contract. My realtor actually went through that very scenario with a seller and was successful in getting the house.
In our situation there were only minor repairs needed and the seller happily made them. But if for instance there was a serious foundation problem requiring $10K in repairs, I would have most likely walked away even if the seller offered to pay for the repairs. Thankfully nothing like that happened and everybody went away happy from our transaction!
By the way, I think I will give you Rep points for bringing up Nader!!
Last edited by North_Raleigh_Guy; 02-13-2007 at 03:53 PM..
Ok, I have to vent my frustrations with my understanding of how real estate contracts work there. It really does seem that the seller has more potection that the buyer. But the seller is the one holding all the cards. As a buyer how the heck am I suppose to know what repairs are needed to an old house w/out conducting an inspection by someone I hire. And why would I the buyer pay for an inspection before I write an offer (someone else could swoop in buy the house and I'm out the 500 for the inspection). I've spoken to a couple of realtors on the board about this. And they explained that we could put in a clause or contingency about repairs. Of course the seller has to agree to the repair amount too.
IMHO, they are the one's who live there, they know if there might be something wrong with the plumbing but as a buyer I just have to guess what I think is wrong with the house and estimate this repair amount in my contract. CRAZY!!! Sorry for the all caps. It seems a bit backwards to me. Then again, maybe I've been living with backwards and forwards now seems crazy to me. LOL!
But, it does seem like a bigger gambling buying an older house in NC because of the lack of cooling off or the inability for a buying to back out during the inspection phase because they didn't like what the inspection found.
I see why so many people buy NEW in NC. And I wonder if the developers associations lobby the real estate laws to give sellers more rights than buyers because it protects them AND eliminates some of their competition from the resales.
Where is Ralph Nader when you need him? (OK, yeah, I know I'll loose some rep points for bringing up Nader. )
It might be better to buy a home in a State where you are comfortable with the process.
More seriously...
The Selling/Buying process can be achieved in many ways. The typical inspection and repair contingencies are only one protocol, standardized by the NC Real Estate Commission and the NC Bar Association to expedite and simplify a process. You can buy with an entirely different format, if you have a preference.
I would suggest you consider having your attorney draw up any offer/contract that is alternative to the standard form. And I would suggest any Seller should have a non-standard offer reviewed by the Seller's attorney. That is how real estate was transacted for many generations, and is still an entirely valid path to accomplish a satisfactory transaction.
Regarding a typical NC real estate transaction: Either party has the right to inspect, or not inspect. You might write an offer contingent on the Seller paying for an inspection by a licensed inspector and performing all noted repairs. Again, probably should get your attorney to write the offer.
I don't see how either party has "more rights." I see a flexible process that is eminently negotiable on many points, and a system that provides accomodation to the weak and protection to parties under duress. You don't have to buy. Seller doesn't have to sell. What could be fairer?
As far as old vs. new goes: The highest prices per square foot around Raleigh are in older homes in established neighborhoods. People buy new because it is cheap.
Value? It's about location, location, location... That hasn't changed.
Like you mentioned in your post, in our contract to purchase our house we had an appraisal / inspection contingency that stated if the house did not appraise to equal or greater than the purchase price or if the inspection uncovered repairs needed in excess of $1,500 we could walk away from the deal and get our earnest money back. The seller had the option of making the repairs which would be fine, but if that $1,500 threshold was tripped we could walk away whether he wanted to make the repairs or not.
I think sellers take on just as much risk as the buyers if not more. They are pretty much taking their house off the market once they go under contract with the buyer.
NRG, thanks for your post. For those of us (by us I mean me ) that have both purchased and sold homes in other states where the inspection period contingency is a bit more favorable to the buyer, the NC laws makes me nervous. For instance, where I live currently during the inspection phase (usually is only 7 days from both buyer and seller signing the contract & h as to be agreed upon by buyer and seller) the buyer can walk for pretty much any reason. BUT the house is NOT off the market during that time. It is listed as "bumpable". And we all know that bumpable means it might be back on the market in a week or it might not be. This prevents the case you mention where the buyer walks on the 29th day and the house is "stale". And a bumpable house going back to "active" does not usually scare other potential buyers away. It could just mean the buyers financing fell through. Bumpable is good for both the buyer and the seller. As a seller it keeps my house still in MLS, open houses continue, etc. Once the contigencies (wheter they be, the buyer sells his house, the buyer signs off on inspection, or the buyer gets financing) are removed the house goes from bumpable to pending. NOW it is VERY difficult for the buyer to get out of pending (death and unemployment are the 2 I hear most frequently).
But basically during the inspection phase the buyer can walk if they decide the don't like the color of the carpet. (Which I would never do.) BUT it does give the buyer time to find out what is wrong with the house that not only needs to be repaired now but what will need to be repaired in the next 3 years. For instance, if the furnance works now but really only has another year or two or life the buyer doesn't know until inspection. If the furnaces works then the seller does not have to pay for it from the $1500 repair clause you mentioned. But in a year or two I'm stuck w/ a 10K bill. THAT will affect what I am willing to pay for the house. But in NC, if I find this out during inspection, I'm stuck w/ the cost and stuck with the original offer I made. That is what I think is crazy.
I don't think buyers should be able to walk away nilly willy. BUT I do think they should be able to have time to fully educate themselves about the cost of owning that particular property and if the cost (beyond immediate repair) exceeds their budget they should have the option to walk away.
Again, I think this does scare some buyers away from buyer older homes. Obviously, this does not affect areas like ITB... but in my opinion the current real estate contract in NC DOES benefit new construction developers.
I see a flexible process that is eminently negotiable on many points, and a system that provides accomodation to the weak and protection to parties under duress.
FWIW, I have a friend who purchased a house in a fast resale area here. He did not have the time to review the HOA restriction before putting in his offer and didn't want someone else to make an offer and get the house from under his nose; so he included language in his offer to the affect that the offer was contingent upon HOA rules allowing a fence to be built around the backyard. He had dogs and not being able to fence them in his yard was a deal breaker. Seems to me you can put just about any contingency in the offer...just depends on whether or not the seller is willing to accept the offer under those conditions. The process does seem pretty flexible and fair.
BTW, he got the house and built a good looking fence!
"...but in my opinion the current real estate contract in NC DOES benefit new construction developers."
Well, the builders often don't use the standard "Offer to Purchase and Contract." See, they have their own attorneys who draft documents that no one should sign without an independent legal review.
The "current real estate contract" you cite is nonexistent. No such thing exists. There is no "contract" until an offer is accepted. The manifestation of the standard offer form differs with every deal. The form is an extremely flexible document. It offers protection to both parties and many national builders are not comfortable with that fact.
They do what you should do. They fashion a document that suits them.
I really don't understand your misgivings.
Principals are in complete control of what they offer and contract to do, buy or sell side.
The legal process is a extremely flexible with all the options one has, even within the standard form.
There is absolutely no state-mandated "contract."
This is so fundamentally clear in all aspects. Your agent should be able to clarify for you any questions. Easily.
Actually if it is a purchase there is no cooling off period. If it an investment property there also is no cooling off period. The cooling off period only applies to refinancing of one's primary residence and is implemented by the truth in lending act (TIL or TILA) Specifically Regulation Z which is overseen by the federal reserve board.
“The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last.” (12 CFR 226.23(a)(3))
You may find out more by going to http://www.federalreserve.gov/boardd...ttachment5.pdf see sction 15(a) through 15(d)
"...but in my opinion the current real estate contract in NC DOES benefit new construction developers."
Well, the builders often don't use the standard "Offer to Purchase and Contract." See, they have their own attorneys who draft documents that no one should sign without an independent legal review.
The "current real estate contract" you cite is nonexistent. No such thing exists. There is no "contract" until an offer is accepted. The manifestation of the standard offer form differs with every deal. The form is an extremely flexible document. It offers protection to both parties and many national builders are not comfortable with that fact.
They do what you should do. They fashion a document that suits them.
I really don't understand your misgivings.
Principals are in complete control of what they offer and contract to do, buy or sell side.
The legal process is a extremely flexible with all the options one has, even within the standard form.
There is absolutely no state-mandated "contract."
This is so fundamentally clear in all aspects. Your agent should be able to clarify for you any questions. Easily.
Regarding the NC real estate contracts that I have seen: I find them to be written very poorly specifically regarding dispute resolution. It is so vague that just about anything can land you in civil court. I think NC needs to add a section asking both parties to agree to mediation and if that fails binding arbitration. Very poor job by the NC real estate commission in my opinion to protect home buyers and sellers.
Well, you know, there is the Repair OPTION. And of course, the amount for the repair contingency. And most agents will explain that there are certain things that the seller MUST repair or the buyer gets his money back and walks away. It doesn't seem like a huge gamble to me and I work more with buyers than sellers.
If the seller continues to take "back up offers" after the contract with the buyer is signed, the buyer runs the risk of having a better offer come in and when the home inspection comes back, the seller may not want to do any repairs in hopes that the buyer will take his EMD and walk away.
I think going into contract puts both buyers and sellers into a stressful situation and thats why you should allow the agents to handle this for you!
Vicki
Hi Vicky. Even though the contract states that there is a contingent amount for repairs or the buyer receives their earnest money does not mean it willhappen. I tried to buy a home that we later found out had stachybotris and other issues. The cost to remediate will definitely exceed the contingency amount specified in the contract. The seller seems to think otherwise so we are spending more than the earnest money to force the seller to provide us not only a refund of our earnest money but more importantly a general release of liability. They are counter suing stating that we breached the contract. Funny thing is they blatently commited fraud on the property disclosure report so we will win. However, we will have to spend thousands in civil litigation costs to have this settled once and for all. Just because it says so doesn't mean it's quite that simple.
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