What do I need to do in the due dilengence time frame? More on the new offer to purchase contracts in NC…

Part 3 in our series on;

 

What’s new in Residential Real Estate in North Carolina?  

NC new Offer to Purchase and addendum

A whole new revised offer to purchase contract as of January 1, 2011

What needs to be done during the due diligence period?

We began our discussion about the new North Carolina Residential Offer to Purchase Contract looking atDue Diligence.  We explored just what the Due Diligence time frame might look like as well as some examples of how much the Due Diligence fee might be.  Then we continued on taking a look at EarnestMoney.  

So today let’s look at just what needs to be done during the due diligence period.

Both you, the buyer, and your REALTOR® need to give careful consideration as to what types of Due Diligence should be performed during the Due Diligence Period.

due diligence time frame]

As the buyer, if you need to be able to obtain financing, be sure to determine whether acceptable or necessary financing is available to you prior to expiration of the Due Diligence Period.

Prior to submitting your OTP I recommend that you start your loan process.  Make sure you have discussed with your lender the time frame they will need in order to complete the financing process for you.  No longer will there be a financing contingency on our offers.  As the saying goes “timing is everything”.

Remember if  you elect to move forward with the purchase of your home after the due diligence period and aren’table to secure financing you will forfeit your earnest money deposit AND your due diligence fee.
due diligence time frame
Also remember that everything must be completed prior to the due diligence date. That includes all property investigation such as; all inspections (we’ll look at these in details next in our series),title insurance and restrictive covenants.  

During the Due Diligence Period, it’s your responsibility to review any document that may “limit the use of the Property or govern the Property owner or obligate the Property owner to a financial payment other than the purchase price, taxes, and governmental assessments”. If such documents are not available from either the listing Broker or Seller, then an attorney should be consulted by Buyer during the Due Diligence Period.

Ah, yes then there’s the appraisal: If the appraisal is an important factor in determining whether or not you’ll get the necessary or desired financing your lender will need to obtain and review an appraisal of the Property prior to the expiration of the Due Diligence Period.

What about a survey: A survey of the Property can reveal important information about the home, including setback lines, encroachments, the existence of utility, storm drainage and other easements , as well as many other important details. I highly encourage all my clients to obtain a new survey in order to determine whether there are any title defects and to consult with a North Carolina real estate attorney to understand the importance of obtaining a new survey.

Flood Hazard??  You’ll need to determine whether your new home and/or any permanent improvements are wholly or partially located in a Special Flood Hazard Area. A definition of the term “Special Flood Hazard Area” can be obtained from the website of the Federal Emergency Management Agency at www.fema.gov.

due diligence time frame

So as you can see there is even more reasons than ever to consult a full service experienced REALTOR® when considering purchasing a property with the new Offer to Purchase contract in North Carolina.

Contact us if you have any questions or even if you just would like to hear more about the new NC Offer to Purchase Contract and addendums

What do I need to know about Earnest Money Deposits with the new contracts in Raleigh NC?

Since we’re starting to receive quite a few questions about the new offer to purchase contract, we’ve started a new series on What’s new in Residential Real Estate in North Carolina.

New Offer to Purchase Contract in North Carolina

Raleigh HomeWe began our discussion about the new North Carolina Residential Offer to Purchase Contract looking at Due Diligence.  We explored just what the Due Diligence time frame might look like as well as some examples of how much the Due Diligence fee might be.

Now let’s take a look at EarnestMoney.  You may already be familiar with Earnest Money as it pertains to the real estate offer to purchase, but we do receive a lot of questions about the earnest money deposit; varying from how much it should be, how it is dispersed at closing, and what happens if there is a dispute…   

Here in the Triangle, earnest money is usually about 1% of the sale price.  Remember just like with the Due Diligence Fee  the home buyer makes the offer and this too is all negotiable!  Nothing is set in stone, however the 1% of sale price amount for earnest money is fairly standard in our market.  

Unlike the Due Diligence Fee, Earnest Money deposits ARE refundable should the buyer decide for what ever reason NOT to continue with the purchase of the home, as long they properly cancel their contract within their Due Diligence period.**

Now with the new contract and the addition of the Due Diligence Fee, we might start to see some variations with Earnest Money amounts as well as how the offer to purchase is written.
Due Diligence: Earnest Money
For instance, we might start to see a Due Diligence Fee and NO initial Earnest Money deposit offered since there is a place for Additional Earnest Money Deposit to be paid by a specific date.  

That date of course could reflect the end of the due diligence period.  By this time as a buyer you will have had to complete all your inspections, lender requirements etc, and will have a fairly secure decision made as to whether or not you will be buying the home.  

So why not go ahead and make that additional earnest money enticing to the sellers?  

When writing an offer to purchase on a home, sometimes it’s not just the price a buyer offers that makes it the one the sellers accept ~ often times it’s what is being offered and how it’s presented.  All the more reason to use an experienced, professional Realtor®.  

**There is an exception to this; Earnest Money Deposits are refundable even after the Due Diligence period has expired in the event of Breach of Contract by the seller as is described in 1(e) of the Standard OTP Form 2-T.

Home Foreclosure Debacle – a threat or an opportunity?

Home Foreclosure
The Home Foreclosure Debacle
The topic of foreclosure captures a lot of attention and is certainly prevalent in today’s economy.  If you or someone you know is struggling to manage mortgage payments, or if you’re considering selling your home and are wondering how the foreclosed homes in your neighborhood will affect the value of your own home, it’s important to understand your options and what you’re up against.

How do you feel… OPPORTUNITY or THREAT?

Foreclosures ~ it’s a pretty hot topic on many peoples minds and concerning the Raleigh real estate market too.  For some it may conjure up very personal feelings and/or an assortment of different opinions.
Below are some recent stats and facts impacting diverse opinions regarding foreclosures.  How does the following information make you feel?…
  • On average (according to JP Morgan Chase), the time line for a borrowers home foreclosure process from start to finish, where no payments are being made is taking:

               14 months nationwide
               22 months in Florida
               26 months in New York

  • In some situations banks are sending payments back to homeowners (if they are really deliquent) with a demand that overdue payments be paid in full. 
  • In some markets existing bank-owned homes are being held back from the housing market for significant amounts of time as not to flood the existing inventory (this is called the “shadow inventory”).

Depending on where you sit on the fence, every circumstance, every option and every decision, as well as each unique internal and external factor involved, can describe a potential opportunity or threat to be discovered.

For Buyers – The most important thing, regardless of whether you’re interested in a resale, foreclosed home, short-sale, or REOthe focus should always be to find a home that best fits your lifestyle at a price you feel comfortable withAs Realtors® we are here to help navigate through any sticky situations that may arise.  There are no cookie-cutter solutions to be applied across the board, each home buying and selling experience is unique. 

For Sellers – Whether you plan on listing your home with a Realtor® traditionally or as a short-sale, find a Realtor® you feel comfortable with who will be there to guide the process.  An experienced Realtor® will make all the difference creating a smooth transition where you can both feel good about the price and circumstances in which your home is sold.  As mentioned above for home buyers there are no cookie-cutter solutions and each home sale comes with its own set of unique circumstances.

For more information regarding buying a home in the Raleigh area or selling your home in the Raleigh area, visit our website at RaleighHomesOnline or as always feel free to contact us directly.

New Appraisal Guidelines from Fannie and Freddie 6-30-2010

Eleanor always keeps us up on what’s happening in the mortgage industry and this post is so important I thought I’d pass it along!

Well done!

Via Eleanor Thorne 919-649-5057 Cary Mortgage Loans NMLS #67179 (First Financial Services, Inc):

These Guidelines Might Help!

On February 15, 2010 The Federal Housing Administration adopted new appraisal guidelines that include “geographic competency” requirements.  Effective June 30, 2010 Fannie Mae adopted similar requirements, a move that we think is important.

The HVCC ruling came from NY Attorney General Cuomo and it is intended to protect appraisers from coercion from lenders.  Since May of 2009, large banks have been using the HVCC  (Home Valuation Code of Conduct) as a way to create “revenue” centers.  Because the ruling prohibits lenders to SPEAK to an appraiser (or email, txt whatever) Big Banks set up “companies” that collect (for instance) $450 for an appraisal, and then pay the appraiser $275.  Appraisal Management Companies (AMC)are at times, because of their size, working against the system.

Many appraisers refused to do this… and subsequently the Large Banks “hired out” people from 100’s of  miles away (or more) to do appraisals.  My theory is “you get what you pay for…”

In the June 30th memo, Fannie Mae and Freddie Mac agreed that the new rules for appraisals adopted last year need some additional “guidance.”

  • The HVCC does NOT bar Realtors, or other authorized third parties, from requesting that appraisers correct factual errors in their reports, or provide additional information or explanations about the basis for their valuations.
  • Fannie Mae put lenders on notice that they can only use appraisers who are knowledgeable about the area in which they are being asked to value property, and who have the ability to access records on recent sales in those markets.
  • Fannie Mae also clarified previous guidance to lenders on the selection and use of comparable sales, saying appraisers must consider a property’s condition when choosing to use foreclosure sales or short sales as comps.

The current Financial Reform Bills being debated in Congress create a Consumer Finance over site unit that will blend current National Predatory lending requirements and HVCC – so the CURRENT appraisal system will be out the window on November 1, 2010… but it’s unlikely that whatever replaces it will be much better.

If you are interested in purchasing a home in North Carolina, or refinancing a home in Raleigh, please call Steve and Eleanor Thorne, FFSi 919-649-5058.  We know the rules, and we have the best mortgage interest rates available!  We are still closing USDA Home Loans!

Register for REBarCampRDU in Cary, NC  on Eventbrite

Economic Stimulus Package on the Way to the President!!

Great news for troubled homeowners! Last night, Congress approved HR 5140, the Economic Stimulus Package and it is now on its way for President Bush’s signature. The Senate added low-income seniors and disabled veterans to the list of people who would receive money under the House-approved package, then passed the bill by a vote of 81-16.

The House then passed the bill with the added Senate language by a vote of 380-34.

This legislation includes increases to the GSE (which stands for Government Sponsored Enterprises – they are a group of financial service corporations created by the United States Congress) and FHA conforming loan limits.

Borrowers will see immediate relief with new liquidity in the mortgage market and the nation will likely see an increase in home sales. The increase in the FHA limits will mean an additional 138,000 Americans will purchase homes, and 200,000 families can refinance now, safely and affordably.

Over 83,000 REALTORS® took action by lobbying their Senators and Representatives to help bring this bill to the President.