March 15, 2011

The New NC Offer to Purchase: A Buyer's Perspective

Continuing my series on the new 2011 REALTOR NC offer to purchase contract, today, we're looking at it from the buyer's perspective.  For full details on the new contract, you can read my post on all the changes in this new form.  For an overview of the seller's perspective, you can my post on that one.

So, how does the changes affect buyers?  Well, if you've never bought anything before, it really doesn't, as you've nothing else to compare it.  But, if you've purchased something in the recent past, you may be a bit surprised at some of the changes.

As I mentioned in the earlier posts, the biggest change(s) have to do with the due diligence period and the due diligence fee.  In the previous contract, the buyer had several contingencies.  There was a loan contingency, a repair contingency, appraisal, etc.  In short, a bunch of contingencies, which if they weren't met by the dates on the contract, the buyer could get out of the contract and get their earnest money back.

In the new contract, there are no contingencies anymore.  What you have instead is a due diligence period.  During this period, the buyer has to get all inspections done, the loan in order, etc.  Basically, anything you want to do to ensure that you want the house has to be done during this due diligence period.  If this period passes, and you find something out about the property, you can still get out of the deal, but you do not get your earnest money back.

Besides earnest money, there is an added (possible) fee called a due diligence fee.  This is the money that a buyer gives to the seller upon contract that essentially "pays" for the due diligence period.  I mentioned possible, because the buyer does not have to put up due diligence money in order to get a due diligence period.  In fact, most contracts today are offering little, if any, due diligence money.  That seems to be working in what is clearly a buyer's market.  However, as the market stabilizes, you can expect that to change.

What can buyers expect with this new contract?

Earnest money is still in play.  You have a due diligence fee (if any).  With this contract, you have to be pretty sure of your lending before you commit to a contract.  I think the biggest possible change hasn't really hit yet, either (besides due diligence fees becoming more common).

Most appraisers, home inspectors and other inspectors that do work for the buyer on a house under contract send the bull to the closing agent and wait to get paid at closing.  Since this is basically just an option to purchase contract and the buyer can walk for any reason while in the due diligence period (and some do), I think the appraisers and inspectors will start asking to be paid upfront for their services.  While these are always buyer's costs to bear, many buyers don't pay these as they should if they don't end up buying the house.


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