There are 5 things North Carolina home buyers need to know about the North Carolina Offer To Purchase And Contract that are so different from other states. Why is that? Because the wording within it seems to favor the sellers more than the buyers. It truly feels so unfair to home buyers, and they voice that every chance that they get. Here is Part 1 of our two part series featuring things 1-3!
#1 – North Carolina’s Non-Refundable Due Diligence Fee
North Carolina is known for having two different deposits: the Due Diligence Fee and the Earnest Money Deposit. (Click here to reach my blog post entitled “Due Diligence Fee-vs-Earnest Money: NC Deposits Explained” for more info about the two different deposits.)
The most important takeaway is that the Due Diligence Fee is non-refundable if the buyer terminates the contract. It does not matter if the inspection report shows something terrible on it (regardless of what is on it) or if the appraisal comes back low… it is still non-refundable. The Due Diligence Fee is refundable if the seller breaches the contract.
A non-refundable deposit is the biggest pain point for home buyers, especially those coming from another state. Many buyers try to seek legal action to get their money returned to them, but it can be very difficult to prove that a seller has breached the contract with relation to material facts. Most often, buyers walk away needing to pay attorney fees and not getting their deposit back. Some attorneys won’t even take on the case due to the difficulty involved and the low likelihood of winning.
On a positive note, North Carolina does have the typical Earnest Money Deposit that sits in an escrow account (most typically with an attorney) and may be refunded if a buyer breaks the contract before a specific time and date. That is at least one thing that is similar between North Carolina and other states.
The amount of each deposit is often determined by market conditions and location in the state.
#2 – Properties Sold “As Is”
The North Carolina Offer To Purchase & Contract states that “THE PROPERTY IS BEING SOLD IN ITS CURRENT CONDITION”, aka “As Is Condition”. It is so important that the statement is in all caps on the contract to get the reader’s attention. Sellers in North Carolina are not obligated to make any repairs, no matter what comes up on the inspection report. All repairs are a negotiation and not an obligation – regardless of what the inspection report uncovers.
Sellers are obligated to make repairs if the house is not in the same or better condition at closing as on the day of the contract, wear and tear excluded.
For example, if there was a major water leak in the home after going under contract or if the sellers put a big hole in a wall while moving out, then they would be obligated to repair those situations. Should the seller refuse to make those repairs, then the buyer can terminate the contract and get their Due Diligence Fee and Earnest Money Deposit back, in addition to other money owed for inspections, appraisals, etc. The seller refusing to make the repairs is a breach of contract, which is why the Due Diligence Fee would be returned.
Please note: there are certain repairs required by FHA or VA loans in order for you as the buyer to get the loan. No matter what, a seller can still refuse to complete the repairs. In this case, you as the buyer can offer to pay for the repairs; however, if the seller refuses to do the repairs and you cannot afford or simply won’t pay for the repairs, then you will not get the loan and will need to terminate the contract. In this case you will lose your Due Diligence Fee when you walk away from the purchase but you may still get your Earnest Money Deposit back.
To summarize: Sellers are not obligated to make any repairs and all repairs are a negotiation and not an obligation. Some sellers may agree to some or all repairs and other sellers may potentially give a credit at closing in lieu of making the repairs; however, you as the buyer must set your expectations accordingly that there is no obligation for any repairs… “as is” condition! Buyers beware!
#3 – Sellers Are Not Obligated To Provide A Clean Home
Did you know that sellers in North Carolina are not obligated to provide you with a clean home? That’s right! They are only obligated to remove their personal items and “debris”. What even is “debris”? Well… it’s garbage. Cleaning does not mean “debris”.
If you as the buyer want to have the home professionally cleaned before closing (including the carpets), then you must negotiate that into the original purchase contract before even going under contract. Keep in mind that this is a negotiating point which sellers can refuse.
Please note that new construction builders will provide you with a professionally cleaned home before closing.
Buyers for resale homes in North Carolina should set their expectations accordingly that the home may not be professionally cleaned.
