Starting January 1st, a new real estate process was enacted in the state of North Carolina. This process deals with a new contract that will now be used to buy and sell homes.
Originally, a potential buyer would make an offer on a property that is for sale and once the buyer and seller reach an agreement, the contract will then be signed by both parties. The buyer will provide earnest money and the house will be changed to “conditional” status, which will make the property essentially off the market unless the sale falls through. The buyer has the responsibility of meeting several different deadlines and if they fail to meet any of these, the seller has the option to cancel the contract and keep the earnest money. The buyer is then able to cancel the contract, as well, and receive a refund of the earnest money at the buyer’s discretion.
However, with the current housing market, this previous contract created some bad situations. Sellers were under the impression that they had their house sold, only to have the buyer cancel the contract after inspections. Buyers were legally entitled to receive the earnest money back, but the Realtors® cannot return it without the seller’s written authorization. If the seller and buyer cannot agree on who receives the earnest money within 90 days, the Realtors® are required to turn it over to the court to decide.
This new contract process’ goal is to alleviate this situation by creating a due diligence period. The new process was summarized by Ballantyne Scoop website below:
“The Potential buyer will make an offer on a house and the buyer and seller begin to negotiate the contract. After both parties agree on the terms, the buyer will provide the seller with a due diligence period, and the Realtors® with an earnest money deposit. During the due diligence period, the buyer needs to complete any work that needs to be done in order to decide whether he/she is willing to able to move forward with this purchase. This includes applying for the mortgage and conducting inspections. During the due diligence period, the buyer can cancel the transaction for any reason. The buyer would receive the earnest money deposit back, but the seller keep the due diligence fee. If the buyer has not canceled the contract by the end of the due diligence period, he/she will be in default if he/she doesn’t go through with the contract. This means that the seller will automatically receive the earnest money deposit if the buyer did not cancel the contract before the end of the due diligence period and then does not close on the house.”
This new contract helps keep equality in these sales, for both the buyer and the seller, but it also makes it easier for buyers and Realtors® to track deadlines and make sure they are completed in a timely manner. Now there is just one deadline to keep track of instead of several.