3 home buying pitfalls you can avoid

Buying a home today isn’t rocket science.  However home buying pitfalls that lurk in the process are mind boggling.  Even for an expert. Here are 3 pitfalls you can avoid…

3 home buying pitfalls to avoid

Home buying pitfalls to avoid

I can’t imagine someone meandering through the landmines of ambiguities of buying a home without an advocate.  Maybe it’s because I’ve been a REALTOR® for over a decade and I have seen these things happen.  They happen very innocently, but the ripples are so uncomfortable for you the buyer, when it’s your situation! Below are 3 home buying tips to help. We’d all love the world to turn smoothly and that includes when buying a home.  But when it doesn’t, it can become very disruptive and very unsettling.  There are real hidden issues that do come up and cause not only a loss of sleep, time, and money, but a potential legal suit as well. So what can you do?  Take a deep breathe;  and do your homework with your agent during your due diligence period.  There is a ton of information for potential home buyers to gather, and even more that their agent can get.  Research the bejeebers out of the home and don’t quiet that little voice in your head if something doesn’t feel right! Then sit down and discuss what’s real, what’s important, and what needs more clarification with your agent. Here’s some home buying tips I’d like to share…

Home Buying Pitfall #1 County tax records…

Are they perfect? No, but if there is a discrepancy between what’s on that MLS sheet and what’s on the county records, someone better question it.  Is there a big difference in the square footage?  That might indicate that the seller has done some adding on without pulling the proper permits.  Oh no problem you say, well think again.  It’s a very big problem.  If permits weren’t pulled, it didn’t pass city/county inspections.  If if didn’t pass city/county inspections and god forbid something happens, your insurance may not cover you.  If a fire were to start due to a faulty breaker or electrical error and the work was done by Uncle Al – there’s a very BIG problem…  

Home Buying Pitfall #2 What about homes that are renovated?

Be sure to know the effective date of the home, and not be fooled by looking at the brand new package with gleaming hardwood floors and granite counters.  The year could be wrong on your MLS sheet. Homes bought, renovated, and flipped are candidates for well you’ve heard the saying before; putting lipstick on a pig.  

Home Buying Pitfall #3 Well and Septic Permits… 

Then there’s the number of bedrooms in the home. Well and septic tanks here in Wake County real estate are fairly common. So watch for another common mistake in the number of bedrooms being stated on the MLS sheet. Verify that the number of bedrooms listed on the MLS sheet match the number of bedrooms that the septic permit was pulled for.  Oh, that’s not a problem either because there aren’t any septic police I hear you say.  That might be true for the system itself, but when it comes time for YOU to sell you won’t be able to advertise it without repercussions as a 4 bedroom if the permit is pulled for only 3 . So make sure that you have chosen an agent that will do the homework necessary for you once you’ve narrowed down your search to just that perfect one.  Because it’s after you’ve had the fun of ‘looking’ and picking the one home you love that you will be so happy that you have an experienced agent working for you; making sure you’ll get to closing AND enjoy that lovely home for years to come…

Due Diligence – Part 3: Home Buyers

Due Diligence – Part 3: Home Buyers

A few basics for North Carolina Home Buyers regarding Due Diligence.

Due Diligence Series: Realtors, Buyers & SellersDue Diligence is still so new in our Triangle Area Real Estate Market that there isn’t yet a standard or rule of thumb to guide us.

As we mentioned in Part 1 for Realtors® and Part 2 for Sellers, here in the North Carolina Raleigh-Cary area due diligence (in a nut shell) is a clause in the new Offer to purchase contract that sets a time frame for a buyer to do everything they need to do (the home inspection, appraisal, pest, radon, lead paint inspections, mortgage approval, etc) associated with moving forward with the purchase of the home.  The sellers are compensated for this time frame with a Due Diligence Fee that is non-refundable should the buyers decide the home is not for them for what ever reason or no reason at all…

If you’re not yet familiar with the Due Diligence process take a look at our earlier blog series that explains in details and talks about What’s new in NC Offer to Purchase Contract.

We’ve all heard, buyer beware or caveat emptor… but the new Due Diligence clause (in my opinion) was set in place to protect YOU as the buyer should any unforeseen problems arise.  Making it less tangled in disagreement over the release of earnest money.  Remember, as a buyer you have the right up to 5 PM on the last day of your due diligence period to walk away from the purchase of the home for any reason at all… ranging from inspection problems, mortgage issues, or simply because you changed your mind.

 

There are some things we’ve learned as Realtors® who have experience navigating our clients through this new Due Diligence process that we would like to share.

Guide 3 of 3 in our Due Diligence Series:  Buyers

 

Buyers:

  • Be respectful of the time you have within the due diligence period (asking for an extension can really put off the sellers) and the dates are “time is of the essence”
  • Check with your mortgage lender and make absolutely sure they can have your loan processed and out of underwriting by the end of your due diligence period (that includes surveys, appraisals, etc) as their is no longer a  mortgage/financial contingency associated with the new OTP.
  • Understand that you’re asking the sellers to reserve their home for you for the duration of the due diligence period without any guarantees; and consider this when deciding how to proceed when offering due diligence money.
  • This due diligence fee is what you pay directly to the sellers for the the due diligence period… some contract offers may include earnest money once the due diligence period is over.  This practice can potentially alleviate earnest money falling into dispute  (good to have warm fuzzies about not tying up that larger chunk of change)!
  •   Don’t offer more than you’re comfortable with. Should something come up during your due diligence period and you do decide to terminate the contract remember the seller keeps the due diligence fee.

Work to find a balance everyone feels OK about.

  • Ask questions, and lots of them.  OF your REALTOR®, lender, inspectors ~ everyone! If you’re unsure or curious about how something works or what something means don’t hesitate to ask.  Rely on your experienced North Carolina Realtor® for information and guidance.

 

Gather information, feel comfortable with the process and HAVE SOME FUN!  If done properly this can be a very rewarding process as you move forward on the purchase of your dream home!

Due Diligence – Part 2: Home Sellers

Due Diligence – Part 2:  Home Sellers

A few basics for North Carolina Home Sellers Regarding Due Diligence.


Due Diligence Series: Realtors, Buyers & SellersDue Diligence is still so new in our Triangle Area Real Estate Market that there isn’t yet a standard or rule of thumb to guide us.

As we mentioned in Part 1, Due Diligence for Realtors®, here in the North Carolina Raleigh-Cary area due diligence (in a nut shell) involved the set amount of time a buyer has to do the home inspection, appraisal, pest, radon and lead paint inspections, etc., to decide if they want the home after everything has been thoroughly inspected.  The sellers are compensated for this time with a Due Diligence Fee that is non-refundable should the buyers decide the home is not for them.

If you’re not yet familiar with the Due Diligence process take a look at our earlier blog series that details What’s in the new NC Offer to Purchase Contract.

As the saying goes… buyers beware, but the new Due Diligence period is put in place to protect the buyer should unforeseen problems arise. 

Feedback from a few of our recent sellers we wanted to share with you:

The Due Diligence period = Sellers Beware. 

One of our roles as Realtors® in many home buying and selling transactions is to be the calm in the storm.  Selling a home can be a stressful and emotional time and it’s my job as a Realtor® to allow YOU to stay focused on the excitement of moving on to a new phase in your life.  As Realtors® who have had ample experience navigating our clients through this new Due Diligence process… we’d like to share some of the tips we’ve learned along the way.

Guide 2 of 3 in our Due Diligence Series:  Sellers

Due Diligence Fee

Sellers:

  • When you receive an offer – Make sure you feel comfortable with the length of the due diligence period and with how much you’re being compensated (from the due diligence fee) for that amount of time.

Congratulations you got an offer!!  Before jumping up and down let’s look closely, it’s a bit of a balancing act.  The buyers need time to investigate the home but as a North Carolina home seller there’s NO guarantee during the Due Diligence period the buyers won’t walk for any reason ranging from… a handrail that needs tightening, foundation problems, because they found a different home they like more, or even just because they got cold feet.

It’s probably unrealistic to expect a buyer will put a large percentage of the purchase price down for due diligence… consider that the buyers will also be investing in the appraisal, home inspection, pest, radon, lead paint, survey, etc., BUT you have to feel comfortable with the amount.

  • HOW MUCH?Some feel that buyers should be expected to compensate the home sellers for an equivalent amount of their mortgage for that period of time.Example:  If the home buyer wants 4 weeks for the Due Diligence period and your mortgage is around $2500/month, a seller may expect about $2500 in Due Diligence fee.

In the Triangle market we’re seeing everything from $250 for a 3 week period to thousands for a 60 day period – all is on the table for negotiation.

There doesn’t seem to be a lot of consensus in our Triangle area regarding how much the Due Diligence fee should be.  Naturally, sellers feel the fee should be higher, home buyers want the fee should be lower, and we as Realtors® work to find a comfortable balance between.

The important thing is to stay within your level of comfort.  Assess the risk with the reward, and with your Realtor®, decide if you can live with the results.

Due Diligence – Part 1: Realtors

Due Diligence Do’s & Do Not’s – No Standard Yet

Due Diligence Series: Realtors, Buyers & SellersDue Diligence is still so new in our Triangle Area Real Estate Market that there isn’t a standard or rule of thumb yet to guide us.

I received a call the other night from a colleague with some questions on an offer they just received; it was concerning the new due diligence process.  Here in the North Carolina Raleigh-Cary area due diligence (in a nut shell) involves the set amount of time a buyer has to do the home inspection, appraisal, title search, pest, radon and/or lead paint inspections, survey,  mortgage approval, etc., in this time frame they have to decide if they want to buy the home or not.  Now the sellers are compensated for this Due Diligance time frame with a Due Diligence Fee that is non-refundable should the buyers decide the home is not for them.

If you’re not yet familiar with the Due Diligence process take a look an earlier blog series that explains in detail and talks about What’s new in NC Offer to Purchase Contract.

We all know well… buyer beware, but Due Diligence is put in place to protect the buyer (without forfeiting their Earnest Money) should unforseen problems arise pertaining to major home components. Before 5 PM of the Due Diligence date a buyer can walk away from a purchase contract for any reason OR NO REASON AT ALL. PERIOD.

Feedback from a few of our recent sellers I wanted to share:

The Due Diligence period = Sellers Beware. 

As we all know, one of the major roles of Realtors® in most home buying and selling transactions is to be the calm in the storm.  As Realtors® who have had a decent amount of experience navigating our clients through this new Due Diligence process… I’d like to share some of the tips I’ve learned along the way.

Part 1 of 3 in our Due Diligence Series:  Realtors®

Realtors® TO-DO LIST:

  • Educate your buyers and sellers about how the due diligence process works.  Help your clients understand the pros, cons, caveats and expectations regarding foreseeable situations.
  • Explain how the Due Diligence money is different than the Earnest Money, understanding the role of each allotted amount.
  • (Buyers Agents)  Consider Time Management –  get any and all items on the due diligence home check list completed during the Due Diligence period, without asking for an extension.
  • (Listing Agent)  Keep your clients in the loop throughout the process – they are eager to hear from you.
  • Use your experience to guide your clients through… taking their personal levels of comfort into consideration.

REALTORS® DON’T LIST –

  • DON’T ignore any of the DO items above.

 

For more visit:

Part 2:  Due Diligence for Home Sellers

Part 3:  Due Diligence for Home Buyers

Do you have any Due Diligence Do’s & Don’ts to add?

What inspections should we consider during the due diligence period? More on the new NC Offer to Purchase contract

Part 4 in our series on;

 

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

 

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

 

NC new Offer to Purchase and addendum

 

We started this series on What’s new in the NC Offer to Purchase Contract as a result of questions we’ve been getting since the new forms were announced.  

Next in our series let’s answer the question:

What inspections should we

consider having done during the

due diligence period on the home

we want to purchase?

ASHI Certified
One of the most important elements of the new NC offer to purchase contract is what needs to be done during the Due Diligence Period.  As the buyer one of these options is that you have an opportunity to inspect the property both inside and out.  We highly recommend a licensed, bonded, ASHII certified home inspector be used.  

A home Inspection will determine the condition of the property and assure that anything electrical, mechanical, or structure within the home is in adequate working condition and that it meets all appropriate NC Residential building codes.  Your home inspector will also investigate any improvements that have been done on the home, as well as look for the presence of unusual drainage conditions or evidence of excessive moisture which might adversely affect the home.

Residential Consulting

 

All in all your home inspector will give the home your considering a full review and provide you with a well written report with their findings.  

Your home inspector may also provide an in house monitoring device to test for radon gas too.

 

If the property is on a well and septic system, you will have the opportunity to have those systems inspected too.  

You may also elect to have the home tested for lead base paint, asbestos or other environmental contamination. Homes built prior to 1978 will require a lead base paint addendum.

There’s a saying around the Triangle that it’s not a question of IF you’ll get termites (or other wood destroying pests) but WHEN.  So it’s also highly recommended that you have a pest inspection completed within your due diligence time frame.  The pest inspector will check the home from top to bottom, for evidence of wood-destroying insects, active or dormant and report any signs of past/present  damage.   *In some cases the sellers may have a warranty already on the property in which case it’s a good idea to continue with the company that has that warranty.

So as you can see there are 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 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.

There’s changes you need to know about if buying or selling a home in Wake County!

 

What’s new in Residential Real Estate in North Carolina?A whole new revised offer to purchase contract as of January 1st, 2011

NC new Offer to Purchase and addendum

 

We’re starting to get asked a lot of questions concerning the new offer to purchase contract and addendum

As many of you probably already have heard, members of the North Carolina Association of Realtors® and lawyers from the Real Property Section of the NC Bar Association came together to form the Joint Forms Task Force.  

For over 18 months they convened to craft together a new NC Residential Offer to Purchase Contract (OTP) and revised addendum forms that they believe will eliminate a lot of problems and disputes which our older forms caused.

So let’s start to take a look at what’s new…  our old forms comprised of what was called Alternative 1 and Alternative 2.  The majority of Agents used Alt 1.  Which in turn was what most of the public was familiar with.  Alternative 2 was more along the lines of how the new OTP contract looks.  However our old OTP forms had a barrage of dates to remember, and negotiation processes strewn all through it. Which quite frankly in and of itself made things very complicated and confrontational.

NC new Offer to Purchase and addendum

The first biggest change you’ll find in the new OTP is now what’s called the Due Diligence Period & Fee.   The Due Diligence fee is an amount of money the buyer offers/gives the sellers to create a due diligence period of time; a set period of time for the buyer to in essence “look & see”.  The fee is NOT mandatory.  This fee is made payable to the seller AND is non-refundable (however there are exceptions) should the buyer decide NOT to follow through with the purchase for whatever reason.  If the sale continues to closing the due diligence amount is credited to the buyer.  

During this Due Diligence time period the buyer MUST investigate the property completely and finalize ALL lending requirements.  All inspections, review of documents, insurance, loan approval, surveys, and appraisals must be completed by 5 pm of the date determined on the offer…  time being of the essence.

Now remember the amount of the fee and the length of the due diligence period is negotiable by the parties involved in the OTP.   As would be expected buyers will look for a smaller fee and longer period if possible, and sellers of course will look at the fee more in terms of what they may loose, should the buyer decide to walk away from the sale on the very last day of the due diligence period.  

So what might the due diligence fee and time frame look like? Remember now all of this is negotiable and there are NO SET rules!  But a likely scenario could be the buyers need 30/45 days to organize and complete ALL their inspections, loan approval etc.  Let’s for the sake of this scenario say they (buyers) have already spoken with their lender and have their pre-approval and their loan is in process.  Their lender should advice them how long the loan approval and appraisal will take and how much time they’ll need to clear underwriting.  

NC new Offer to Purchase and addendum

 

 

For our example let’s say the buyers are making an offer on a $400,000 home, and would like to have 30 days to due all their preparations.  They could expect the sellers in this example to request a few thousand dollars as a Due Diligence fee.  Since this fee if NON-REFUNDABLE to the buyers should they decide they don’t want to follow through with the purchase of the home for what ever reason, buyers make sure your REALTOR® is experienced in handling the transaction smoothly for you.  

Seller’s on the other hand make sure you understand that this fee is yours to keep should the buyers decide to not purchase your home.  It is the only compensation you are entitled to.  

As you can well imagine, this is just one aspect of the new NC OTP contract.  There’s more!  So that being said with the new offer to purchase contract and addendum  please make sure you work with professional experienced Realtors®  now more than ever. 

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 addendum.

 

Next we’ll take a closer look at earnest money – both upfront and additional as it pertains to the new NC offer to Purchase Contract.