Due Diligence in North Carolina Real Estate:
North Carolina Real Estate Law allows for what is called “Due Diligence” during the process of purchasing a home in this state. Not all states are the same, so it is important to understand this concept and process when considering the purchase of property in coastal North Carolina. Below we will go through and help you understand the process of due diligence in North Carolina which will help you navigate this concept if you are planning on moving to the state or have never heard of due diligence and want to know more.
What is Due Diligence in North Carolina?
Due Diligence is the buyer’s opportunity to thoroughly investigate the property after you are under contract to purchase it. At your initial walk through and viewing of your next potential home, you look at many things such as the number of bedrooms, bathrooms, design, location, style, size and proximity to desired locations. While you may take a quick look at things like the roof, and age of heat and A/C unit, how do you know the actual condition and functionality of the items?
It can be hard sometimes to gauge things like this from a simple walk through, so it is important to take a closer look. Having an in-depth inspection into things like the garbage disposal, smoke detectors, dishwasher, built in oven or stove, hot water heater, fans, lights, garage door openers, sinks, drains, showers, outdoor lights, receptacles, gutters, windows, light switches, the homes foundation, crawl space, potential pest infestations, septic functionality, etc. is VERY IMPORTANT!
While the initial view of a home may seem perfect, it could potentially have many flaws that make or break your decision to purchase that home.
This is what the Due Diligence period in North Carolina real estate is all about! Giving the buyer the opportunity and time to access and thoroughly inspect the property prior to moving forward with the purchase. This allows for the buyer to request any repairs to be completed by the seller, helping the buyer decide to move forward or to back out of the real estate purchase.
Is Due Diligence required?
No, Due Diligence in the state of North Carolina is not required, but highly recommended. You are not legally required to do any due diligence prior to purchasing a home in the state. You may simply agree on a purchase price with the seller and then proceed to completing the transaction.
If I do not pay a Due Diligence Fee, can I still do a home inspection?
This answer is tricky! You DO have the option to forgo a real estate due diligence fee in North Carolina. This would not necessarily forfeit your ability to perform any due diligence activities such as inspections or other prepurchase activities that the due diligence period allows for. Conducting Due Diligence without paying a fee is a possibility, that is of course if the sellers agree to allow you to. If the seller does not agree to allow you to conduct a free period of further investigations (due diligence), you would automatically move past this at the execution of the North Carolina residential real estate purchase agreement. This would then obligate you to purchase the home or forfeit the earnest money you have put forward as agreed to in the North Carolina residential offer to purchase contract.
Can I get the Due Diligence fee refunded to me?
The due diligence fee paid to the seller of a home is considered to be non-refundable. This is a payment made to the seller of a home, which allows the buyer time and the opportunity to conduct further inspections of the home. It is also considered a good faith payment to the seller to take their home off the market and mark it as pending. However, do not be concerned about paying this fee, it is taken off of the total purchase price of the home at closing, if you choose to purchase the home.
What is the average amount of due diligence paid to home sellers?
While real estate due diligence fees vary in different parts of the state of North Carolina, here locally in the Southport and Oak Island area, we see the average amount to be around 1% to 2% of the total purchase price. Although there are no standards or requirements in place, we have seen these numbers stay pretty constant. On the flip side, we have seen both lower as well as substantially higher due diligence fees in local real estate transactions. These fees should be carefully considered as they are commonly referred to as non-refundable. It is also important to remember, sellers DO take this number VERY seriously when considering offers, as it speaks to the seriousness of the potential buyer.
How long is the due diligence period?
The duration of the due diligence period in North Carolina can vary, be negotiated, and agreed upon by both the home buyer and seller. Time can range from just a few days to three months or even longer. Many situations and circumstances may dictate the extent to what time frame will be acceptable and/or required to complete a satisfactory due diligence for a prospective buyer. Within reason, the average due diligence period we see in Brunswick County North Carolina residential real estate is between fourteen to thirty days.
What if Due Diligence inspections reveal issues with the home?
During the course of a buyer’s due diligence period, inspections are completed and may reveal issues, some may be minor, while others may be significant. This is what the North Carolina due diligence process is for! If or when issues are found the buyers have a choice; (1) they can accept the issues for what they are and know that if they wish to in the future, they can fix the items themselves or hire a contractor to fix them at their expense, (2) the buyers can submit what is called a residential real estate due diligence request to the seller. This is a formal signed request to the seller of the property to either fix the issues found or in leu or fixing them, the buyer can request that the seller reduce the agreed upon sales price to compensate for the found issues.
Do sellers have to fix items found during the due diligence period?
Unfortunately, the sellers do not have to agree to either fix nor reduce the price of the purchase contract, if a North Carolina residential real estate due diligence request is received by the seller. This can be a potential issue for the home buyer.
Hopefully we were able to shed some light into what exactly Due Diligence is and what it involves in North Carolina residential real estate transactions. This is not necessarily a difficult process, but is vital to understand during the home purchase process in North Carolina so you are, to the best of your ability, aware of the condition of the home you are purchasing.
Call one of our agents here at Southport Oak Island Realty Group to help you through the process and get you into the home of your dreams!
For more information on due diligence in North Carolina please click on the link below to read from the Due Diligence Questions and Answers Bulletin from the State of North Carolina Real Estate Commission.
Questions and Answers on Due Diligence – North Carolina Real Estate Commission