In North Carolina's Residential Real Estate Contract, Understand the Due Diligence Clause.

     In Hendersonville, North Carolina and other parts of the country, when a buyer buys a house from a seller, a common custom is to put up a binder deposit, an earnest money deposit.  This money is customarily held in escrow by the Realtor or an attorney.  The purpose of this small amount of  money is for the buyer to let the seller know that he is earnest and sincere about buying the property.  The buyer usually puts up this money, say $5000 on a  $500,000 house.  The Realtor puts the money in escrow until closing.  Then the money is turned over to the seller.  If the buyer backs out of the transaction for a reason that is not allowed by the contract, the buyer forfeits this money to the seller.

If you have a house for sale in Hendersonville, Call Ron Climer

     An equally common custom is to have the contract contingent on several conditions such as the financing being approved by the bank or a home inspection.  There may be several contingencies.  They are expressed in the contract.  If one of these contingencies are not met, the buyer can refuse to close and get his earnest money deposit returned. 

     In North Carolina, we have invented this thing called due diligence.  The standard contract that most North Carolina Realtors use for residential sales states that the buyer, AT THE BUYER"S SOLE DISCRETION, can decide to proceed or or terminate the transaction during the due diligence period.  If the due diligence period is thirty days, the buyer, for absolutely no good reason can decide not proceed with the transaction. The buyer will not forfeit his escrow deposit.  The only money that the buyer will forfeit is the "due diligence"  fee that the buyer paid to the seller at the time of signing the contract.   Do not confuse "due diligence" money with escrow earnest money deposit.  They are not the same thing.  The earnest money escrow deposit is held by an escrow agent.  The "due diligence money is paid directly to the seller at the time of signing the contract..  The seller gives this money back to the buyer at closing if there is a closing.  If the buyer backs out, the due diligence money belongs to the seller.  The buyer gets his escrow money back.

     Picture this.  Mr. Seller has a $200,000 mortgage at 5% interest  on his house that is for sale.  His taxes are $2000 per year.  His insurance is $1000 per year.  He has moved out of the house in Hendersonville, North Carolina and has moved to his new house in Raleigh, North Carolina where he has a new job.  How much does it cost Mr. Seller to own that house in Hendersonville every day?  It looks like his interest is about $27 per day.  His taxes are about $5 per day.  His insurance is about $3 per day.  At the behest of his Realtor, he has kept the electric and water turned on while the house is for sale.  That is about $10 per day.  It is costing Mr. Seller about $45 per day to own this house.  Mr. Buyer makes an offer to buy the house with a $5000 escrow deposit and a $50 "due diligence" fee paid directly to the seller.  The "due diligence" period is 30 days.  Twenty nine days after signing the contract, Mr. Buyer backs out on the transaction because he can not get a mortgage at 3%  like he was hoping to.  Mr. Realtor gets no commission.  Mr. Seller has his house 'back on the market' .  This adventure cost Mr. Seller about $
1300 in carrying costs.  Mr. Seller is back at square one looking for a buyer.

     Everything in a contract is negotiable.  Maaaaaaaaaybe Mr. Seller should have asked for a $1300 "due diligence" fee.  Mr. Seller gives the money back to the buyer at closing.  That is what it says in the standard North Carolina Residential real estate contract .  If there is no closing, Mr. Seller keeps the "due diligence" fee.

     If you have your house for sale in western North Carolina, maybe it would be a good idea to get a copy of the contract that your Realtor will be asking you to sign soon and read it.  Be certain that you understand it.  If you have a house anywhere near Hendersonville, North Carolina and you would like someone else to own that house, I can make that happen.  call me, Ron Climer, at 828 755 6996.  If you are looking to buy a house in western North Carolina, contact me at www.hendersonvillekw.com  or www.ronclimer.com