Buying and Selling real estate in North Carolina requires some understanding of certain terms contained within contacts or binding agreements. Information provided on this page will attempt to provide some understanding for these terms. With first things being first, if you have not already read and reviewed this brochure, please take time to read it: Working With Real Estate Agents in NC
Due Diligence Period: This term is explained within the Offer to Purchase and Contract adequately, but it receives the most amount of questions from Buyers and Sellers alike. The Due Diligence commences when all parties have executed the Offer to Purchase and Contract and terminates at 5:00 p.m. on the date specified in the Contract. During this period the Buyer can have any and all inspections completed on the Property. They can work on getting their loan approved. They can have whatever tests run that they so choose. On or before 5:00 p.m. on the specified date of termination, the Buyer has the right to terminate the contract with no questions asked and have their Earnest Money Deposit returned. The Seller has no control over this action that might be taken by the Buyer. One caveat is that the Offer to Purchase and Contract has provisions for a Due Diligence Fee. If during negotiations the Buyer has paid any funds stipulated as a Due Diligence Fee, the Seller may retain these funds and they are lost by the Buyer. On the flip side, if the Buyer continues after the Due Diligence termination period date, then the Due Diligence Fee is applied to the Purchase Price. Another caveat to remember, there are NO financing contingencies in North Carolina as a term of the Contract. All loan approvals should be completed within the Due Diligence Period.
Earnest Money Deposit: Often referred to as “EMD”, the Contract explains clearly how Earnest Money Deposits are to be handled. Earnest Money Deposits may be tendered when an Offer To Purchase and Contract is delivered to a Seller. However, it will not be deposited until such time as the Offer to Purchase and Contract is executed by all parties. Most often the practice locally is to tender the Earnest Money Deposit within five (5) calendar days after the effective date of the Contract. The important thing to remember here is that under most circumstances, if the Buyer does not exercise their rights to terminate the Contract prior to the termination date of the Due Diligence Period; and then the Buyer fails to consummate Closing, the Buyer is subject to losing the Earnest Money Deposit. The point to remember is that the Due Diligence Period termination date is highly critical. Both parties should mark it on their calendar.
Representations: In all of the North Carolina real estate contracts between Buyer and Seller, Buyer and Firm, or Seller and Firm, provisions are provided for Representations. Each respective party should read these carefully to confirm what he or she is representing. A party to a Contract should not execute a Contract making a false representation.
Obligations: Each party has Obligations to fulfill under the terms of the Contract. If a party fails to fulfill those obligations, the other party may possess rights and remedies against the other party. Read these provisions carefully whether you or the Buyer or Seller to understand what obligations you are committing to.
Electronic Signatures: It has become acceptable practice in recent years to allow for the execution of Contractual Documents between Buyers, Sellers, and Firms by means of electronic signature. In practical application it means that Contracts can be entered into rather quickly and easily. It also allows for ease of exchanging and storage of documents with ease. No longer do we have to scan, email, and/or fax. Where this use of technology stops short currently is with the execution of documents that must be attested by a Notary Public. This applies to loan documents on the part of the Buyer’s lender and/or documents that may become documents of public record or recorded in the county registry such as deeds. For these documents a “wet signature” is required.
Disclosures: Disclosure is a term that is used in several contractual documents executed by both the Seller and the Buyer. In these documents, the Seller is the party that is disclosing information and the Buyer is the party that acknowledges receipt of the disclosure information from the Seller. Let’s look at each of these documents with more detail. The actual form can be viewed when clicking on the title.
Residential Property Disclosure: This is a form that is completed by the Seller. Portions of the form are fill in the blank for information actually known by the Seller. If the Seller does not have actual knowledge regarding the information, then the Seller should not complete the information. Parts of the form are “Yes”, “No”, and “No Representation” check boxes. These boxes should be checked truthfully. If a Seller has knowledge that there is a defective air conditioner, then the Seller should no check “No Representation”. The point is that the checking the “No Representation” box does not absolve the Seller of a known defect. Any facts regarding the property must be disclosed. Sellers should read the statements and instructions carefully. All Sellers are required to complete this form if the property is classified as a residential home. It applies to condos and townhomes as well. The only exceptions are new construction and vacant land. Well, there is one other exception for bank owned property, foreclosures and those being sold by a court appointed trustee. If the Seller fails to provide this disclosure, the Buyer has rights defined in the Contract to terminate the Contract. The Buyer signs the disclosure for acceptance, not for validation, of the accuracy of the disclosure.
Mineral Right Disclosure: This is a relatively new disclosure form in NC. Without going into a long explanation, a universally acceptable premise is that an Owner of “Real Property” owns the property that can be seen on top of the ground and all the way to the center of the earth. Dig your heart out!. It just so happens that in the course of history an Owner may have sold their “Real Property” to one party and then retained for themselves or sold to another party all of the mineral, gas, and/or oil rights underneath the surface of the “Real Property”. The truth is that most never know if this has occurred in the past and so the appropriate box to check is “No Representation” The next two questions on the disclosure are a matter of fact and are simple yes/no questions to actions the Seller may have taken or that the Seller intends to take. Again, the Seller discloses, and the Buyer acknowledges receipt. The same rights apply to the Buyer if they do not receive this disclosure from the Seller.
Owners Association Disclosure: This disclosure is different in that it is an addendum to the Contract. It is self-explanatory and is used for properties that are subject to a property owners association, but not subject to the Residential Property Disclosure Act. In simple terms, it is most often used for vacant land in a subdivision that subjects the Property to restrictive covenants and/or assessments.