The process, step-by-step
The executed contract and deposits.
An executed contract is a legal arrangement between the purchaser and the seller. In North Carolina, this agreement must be reduced to writing and signed and communicated to all parties.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. We will use conference calls, group texts and group emails for most of our communication, so that no purchaser/decision maker is left out of the process. Any counter offers, addendums, etc will be reduced to writing and all parties will sign once an agreement has been reached. We will assist with and provide paperwork necessary to accomplish these steps and make sure you have copies of everything.
- Stick to the schedule. In the contract there are certain dates that are agreed upon like due diligence end date and settlement date. Unless all parties agree to modify, those dates are not flexible. There will be requirements of items to get done during the due diligence period like financing, inspections, appraisal, survey, and any other investigation you deem necessary to feel confident moving forward with the property. We will always keep track of the timeline for you and make sure that you accomplish whatever benchmarks are necessary to stay in compliance.
- Due diligence in North Carolina. This is incredibly important to understand. It’s a radically different approach than most other states. We will discuss this many times throughout the buying process. First and foremost, North Carolina has both a due diligence fee and an earnest money deposit. They are two different amounts. The due diligence fee is the money paid directly to the seller if your offer is selected and you officially go under contract on a property. You are credited back that money at closing if you close. However, if for any or no reason you decide not to purchase the property, you forfeit the due diligence money. Regardless of if the house appraises, inspections findings, general change of mind towards the house. If you terminate, you lose that money. Make sure the amount offered is an amount you are OK losing, if you don’t close on the property. Earnest money is an amount made out to the closing attorney to hold. This money is credited back to you at closing. And as long as you were to terminate before the end of your due diligence period, you would receive the earnest money back. However, if you terminate the contract after the end of your due diligence period, you would also be forfeiting the earnest money.
The closing process.
When submitting an offer, the escrow agent is selected. Here in North Carolina, that typically is the closing attorney. We will have closing attorneys we recommend at time of writing the contract. These are attorneys we’ve worked with before and have built mutually strong relationships with. The closing attorney will be the one to hold the earnest money deposit in escrow. They will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. They will review additional details such as recorded easements and encroachments, which limit the rights to use your property. Your closing attorney’s team works closely with your lender to make sure that collaboratively they get you to the closing table on time.
How to hold title.
You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.
Inspections.
Once your offer is accepted by the seller, it is recommended that you have a licensed property inspector inspect the property within the due diligence time period. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structural). We can recommend several different inspectors and help with coordinating their visit on site.
Remember that here in North Carolina, we have as-is contracts. So regardless of what is discovered in the inspections, the seller is not obligated to make any repairs or concessions. However, you as the buyer have the right to see if the seller will negotiate with you and provide some repairs, a credit in lieu of repairs, or adjust down the sales price.
Appraisal and lending.
It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. The property will also need to be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. We will always follow up with your lender to make sure the appraisal is ordered ASAP and that it’s completed and returned during your due diligence period.
Homeowner associations.
The majority of the neighborhoods around the area have a homeowner’s association (HOA). HOA’s can range from low-key with minimal restrictions up to very strict standards that must be abided by. Not only are HOA restrictions important to pay attention to when purchasing a home, but also if there are any covenants, conditions, and restrictions (CC&Rs) that run with the land, regardless of whether a HOA exists or not. If you have special plans for the property like a desire to raise chickens, park an RV or boat on the premises, have a branded work vehicle parked in the driveway, etc. you definitely want to review any HOA or CC&R documents that might prevent you from using the property for the intended purpose. HOAs can also impose restrictions on the number of rental properties allowed in a neighborhood or the minimum length of a lease. These details are very important to know ahead of going under contract on a property, if you are purchasing a property to rent out.
Property insurance.
If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. We will be happy to recommend experienced knowledgeable insurance brokers for every property type.
Home services and utilities.
We will have the seller furnish the list of utility providers ahead of closing so that you can coordinate utilities being transferred to your name the day of closing. Be sure to set aside time to establish these accounts at least 5 days ahead of closing.
Review closing disclosure/HUD.
Once a closing disclosure or HUD (for cash transactions) has been drafted and cross-checked between the paralegal and lending team, you and your Broker will be sent a copy to review. If you see any discrepancies or anything missing, this is the time to point it out so it can be corrected prior to closing. Once this document is available to review, it also provides confirmation of the amount needed to wire to the closing attorney for down payment and closing costs.
Wire funds to closing attorney.
Once you’re comfortable with your closing disclosure, you’ll want to reach out directly to the closing attorney and verify wiring instructions so you know how to send the amount necessary to close. Most attorneys will require a wire, no cashier’s checks like years ago. You’ll want to set up the wire at least a day ahead of closing so it arrives in time. Never wire money without verifying the instructions on the phone with the attorney’s office. Wire fraud is a real thing!