Thursday, March 30, 2023 / by Amy Brown
When relocating from out of state it can be a bit of a surprise to learn that the real estate process is not a consistent process throughout the United States. Every state has their own transaction process and set of laws which can be difficult to interpret. That's why you have me! So let me do a summary for you on how things work in North Carolina so that you can be prepared when you are ready to buy.
Major Differences in Real Estate Law in NC
1. No title companies - In NC, you are REQUIRED to close with a NC licensed real estate attorney. That attorney will conduct a thorough title search for you, discover any issues arising such as encroachments, as well as discuss ways to title your deed. You must use them regardless of whether you are purchasing an owner sold property or working with a realtor.
2. Due Diligence period and deposit - The Due Diligence period is the buyer's opportunity to discover any issues that can be found with the home and land. When you present an offer, the deposit is a lost opportunity deposit given to the seller within 24 hours and is non-refundable for any reason. This is the price for the seller taking the property off of the market while you investigate and for the possibility that you might cancel the contract and that the seller may have lost another willing and able buyer in the process. It is credited towards the final purchase price of the home should you move to close and is a fully negotiable item on the offer. This is the deposit that is the most important to the seller.
3. Earnest Money Deposit - this is what is known as a "good faith" deposit and is held with your attorney in a trust account. This is generally the larger of the two deposits. It is also credited towards the final purchase price of the home should you move to close. The difference is that if you decide to cancel the contract, as long as it is BEFORE the expiration of the due diligence period, you will get a full refund. If it is after the expiration of the due diligence period, this deposit goes to the seller.
4. There are no "standards" for deposits or dates on a contract - Many buyers ask me what the standard is when writing up an offer. In NC, there are no standards or percentages used when determining due diligence dates, closing dates, or deposit amounts. All of these items are negotiable along with the contract price. When determining what you will present, work with your agent to come up with the most strategic amounts that will both benefit you as the buyer but allow you to obtain the property at the same time.
5. Any and all properties in NC are sold "AS IS" - This is what is called a "caveat emptor" state or a "buyer beware" state. What that means is that it is up to the buyer (and their agent) to discover any discrepancies in home condition or issues with the land during the due diligence process.
6. We have two sets of contract negotiations - The first set of negotiations is the original offer. But the second set is generally a few days before the expiration of the due diligence period. This second set is where your agent presents the seller with your findings from the inspection reports and request any repairs that you would like completed or a credit for repairs that you plan to complete yourself after close. The seller is NOT REQUIRED to agree to your requests. This is a negotiation; so the seller may agree to repair himself, agree to a credit, agree to a partial repair or credit, or decline in full. After receiving their response, it is up to you, the buyer, to decide whether you want to continue with the home purchase.
7. Appraisals and contract price - If you are obtaining a loan then your lender will want to get an appraisal. This will be an independent third party chosen by your lender and ordered for you. If the appraisal comes back lower than the contract price, the seller is NOT OBLIGATED to lower the contract price to accommodate the appraisal value. Your agent will, naturally, present the appraisal as evidence to obtain the lesser price but the seller does not have to agree. If the seller declines, then it is up to the buyer to decide if they want to come up with the extra funds to close or if they would like to cancel the contract. In most cases, you will not be able to include the additional funds needed in your loan amount.
8. Tax value vs. Market value - this can be a very difficult one for out of state buyers to understand. Taxes in our area are evaluated every 10 years, not upon every sale! Because of this, the tax value on the county property card is significantly below what the actual market value of the home is. Market value is defined as the most probable price that a property should bring in a competitive and open market. Your agent will pull comparable property sales of homes that have sold within the last 6 months with similar features and condition. But...even if the comparables say that the property you adore is overpriced, remember that the seller has a choice as to what they want to sell their home for. A comparable analysis will not change that if they are not willing to negotiate. A comparable market analysis is not a legally binding price evaluation, it is simply an estimation.
I hope that you found this helpful. Please call me any time if you have questions about the real estate process here. I am happy to help!