Due Diligence North Carolina Style

 

We have a contract on the house! Even though I am in the real estate business, I have the same gambit of emotions as anyone when buying a new home. I went from 'this is the best house ever' to 'if we don't get it, it will be fine. We'll find something else' then back to 'no other house will ever do.'  And  just like any other home buyer, when the agent call to tell me that we got the house,  I did a little happy dance.

The dancing stopped pretty quickly though because now Due Diligence begins. North Carolina does due diligence differently than most other states. A due diligence fee and period is negotiated as part of the offer. The fee is paid directly to the seller and is non-refundable, but it does count toward the closing. The due diligence period gives the buyers a chance to thoroughly exam the property and have any inspections done that they choose to do. It also gives them opportunity to get all of their financing in order. Here's the kicker though: until five pm on the due diligence date, the buyers can walk away from the deal for any reason or NO REASON AT ALL. They will not get their due diligence fee back but they do get their earnest money back.

The first I heard of this type of due diligence was in real estate school. Our teacher was throwing out examples of due diligence fees of $250 and due diligence periods of just a week shy of closing. That may have been true a few years ago when this first started and the market was down, but in the kind of market we are in today a seller is probably not going to accept $250, and she is going to want a shorter due diligence period as well.

With a small due diligence fee and a long time frame, the burden of worry is pretty much on the shoulders of the seller. A buyer could walk away and her wallet might squeak a little in protest at losing $250, but relative to the cost of the house, it's not that much, so the seller lived in fear that the buyer would choose to end the contract, and she would have to start the entire selling process over again.

A realistic fee in the Triangle in this market is from $500 up, and now the burden of worry is shifting to the buyer side because it is a whole lot harder to walk away from $750 or $1000. That said, our way of doing Due Diligence is still an excellent benefit for North Carolina buyers. Better to lose a little up front than to lose your much larger earnest money check because you discovered the house was built on an ancient burial ground and is now haunted with poltergeist.