About NC Pre-Approval Law
The new 2011 NC real estate contract requires a completely different approach to the home buying process and makes loan pre-approval even more important than before. The new contract, currently referred to as the Offer to Purchase and Contract presents quite a few major changes; let’s explore what they are and what impact the changes will have on your next home purchase or sale.
The Due Diligence Period
This may be the largest change in North Carolina’s real estate contract. The due diligence period is a mutually agreed upon time period where the buyer must fully review and investigate the property and decide whether or not to proceed with the home purchase. The length of time allowed and the fee for the period are negotiable and set after both the buyer and seller agree upon the parameters. After a consensus is reached, the buyer has basically purchased this period of time to contemplate the purchase and investigate the property. They have the option to terminate the contract for any or no reason at all, completely at their discretion, before the time period has expired.
Due Diligence Fee
The fee is negotiated and agreed upon by both buyer and seller and provides the buyer the right to conduct the due diligence. The length of time is directly related to the fee amount in that a longer due diligence period would result in a higher fee. Much like the earnest money, the fee becomes the property of the seller and at closing will be applied as a credit toward the buyer’s costs. Do note, this fee doesn’t replace the earnest money deposit but is a separate item.
Due Diligence Process
There isn’t a set of defined items to complete in the due diligence period, but the buyer must complete any of the following items that they feel are important when considering the purchase of the home:
- Have all inspections performed on property
- Have property appraised
- Have a proper survey performed
- Review all relevant property documents
- Secure final approval for any financing
- Investigate insurance availability and affordability
- Investigate zoning, schools, proposed roads, etc.
- Investigate potential flood hazards and flood insurance requirements
- Any other inspection the buyer wishes to perform
The days of the buyer and seller debating what is and isn’t a necessary repair are over. Now, the buyer is free to request that the seller perform any improvements or repairs regardless of whether the item is listed on the previously used necessary repair list. Conversely, the seller is free to refuse these repairs or improvements. The buyer can accept the property in its as-is condition, work with the seller to negotiate a written agreement to outline what will be repaired or simply terminate the contract prior to the end of the due diligence period.
Note: Appraisal or financing contingencies are no longer permitted as these matters must be resolved prior to the expiration of the due diligence period.
Simplified Dates
The new NC real estate contract contains only three dates, a reduction from the previous eight. These dates are:
- Effective date
- Due diligence date
- Settlement date
Seller Breach Provision
In the event that a seller breaches the contract or fails to comply with their obligations to deliver the property at settlement, both the earnest money deposit and the due diligence fee are to be returned to the buyer. If any costs were incurred by the buyer during the due diligence period, the seller is now obligated to reimburse the buyer for said costs as long as they’re deemed reasonable.
Other changes were made to the NC real estate contract but the aforementioned alterations are those most worth mentioning. It can be argued that these changes give both buyers and sellers more protection from the risk associated with today’s real estate transactions. The changes force both parties to be more prepared and informed for the transaction ahead.
Have Questions? Call DNJ Mortgage!
To learn more about NC real estate law, contact our Raleigh, Greenville, or Wilmington, NC mortgage office today. DNJ is proud to serve homeowners and home buyers across North Carolina, South Carolina, Virginia, Maryland, Georgia and Florida