When my husband and I moved to Lake Norman I think our REALTOR assumed we knew everything we needed to know about the process because I had been in real estate for so long in California. It wasn’t until I started taking my North Carolina real estate licensing courses that I realized just how different the sales process is here and how much I DIDN’T know! These are the key elements of North Carolina real estate law, NC Real Estate Commission rules and regulations and common practices here in the Lake Norman area that may be different than other states:
- Buyer’s Agency: Until the buyer has given oral or written authority to their agent to represent them as a buyer, the agent legally acts as a sub-agent of the seller. This is critical because it means that the if the buyer(s) share private information with any real estate agent before they discuss agency choices, the agent will have the duty to share the buyers’ information with the seller. Buyers should not share personal information with any real estate agent (including at open houses) until they have all agreed he/she will be their buyer’s agent because information shared by the buyer with the agent WILL NOT BE CONFIDENTIAL until a buyer agency relationship has been established. Buyers should receive a brochure entitled WORKING WITH REAL ESTATE AGENTS at first “significant contact” with their agent. If you don’t receive one…ask for one! At the time of writing up an offer, buyers will have to fill out and sign the EXCLUSIVE RIGHT TO REPRESENT BUYER Buyer Agency Agreement.
- Caveat Emptor: Let the Buyer Beware! This is HUGE coming from a state like California where the sellers responsibility to disclose anything and everything about their property is pounded into their heads during the listing process. In essence, in a buyer beware state like North Carolina, the responsibility to inspect and investigate a property falls directly on the shoulders of the buyers. So buyers: be vigilent! The seller can elect “No representation” on the sellers disclosure form so essentially they don’t have to tell the buyers anything about the property. However, the listing agent must disclose any material facts that they know or should have known that might affect the value of the property and they usually provide HOA information and that sort of thing. The 4-page STATE OF NORTH CAROLINA RESIDENTIAL PROPERTY DISCLOSURE STATEMENT should be provided to the buyer before or during the purchase contract negotiation process.
- What to look for during a physical inspection: Moisture is the number one issue here. Crawlspaces should have “moisture barriers” and readings will be taken to determine if there is too much moisture. Radon is a pretty common test although I have only had a couple of properties test over the allowable 4.0 pico curies per liter of air. This is most common in homes with walk-out basements. Pest Inspections are required. If you are buying outside a city limit, you will have your own well, septic tank and propane tank for gas. Many buyers elect to test some or all of these. Synthetic Stucco is a bit of an issue as is poly-butelene plumbing but these are workable in most cases. A good inspector who provides a comprehensive report with photographs is extremely important!
- Time is NOT of the essence: This is another biggie (is there such a word?). The residential OFFER TO PURCHASE AND CONTRACT does not have the legal term “Time is of the Essence” attached to the closing date and most of the deadlines with the exception of the Due Diligience Period. What this means is that closing dates can be delayed a reasonable amount of time if the party delaying the closing is showing good faith efforts to close. “Reasonable” is the term thrown around but honestly no agent or even attorney seems to be able to give a concrete definition of “reasonable” although 2 weeks seem to be a number that comes up more than most. This doesn’t mean that contracts don’t close on time because they usually do but it does mean that there is a possibility that there could be “reasonable” delays. If you plan concurrent closings just make sure everyone is on the same page, especially the attorney.
- Role of Attorneys before and at closings: Unlike some states where escrow companies or title companies handle the closing paperwork, in North Carolina real estate attorneys handle the title searches and all of the closing paperwork including handling all funds and loan payoffs. Buyers wire their funds to the closing attorney by the day of the closing. We have a formal closing meeting on the day of closing where the buyers, sellers and their agents sit around a table with the closing attorney and approve and sign the HUD statements, deeds etc. Then the sellers leave and the buyers sign their loan documents with the attorney. After all the paperwork is finished and the lender has funded the loan the attorney will take the appropriate paperwork to the county recorder to have the formal recording of the deed. This usually happens the same day. Sellers usually get their funds within 24 hours depending on time of day of the closing meeting and how busy the attorney is. By the way, in North Carolina the BUYER chooses the closing attorney and pays the attorney’s fees as well as for title insurance, the title search etc. and fees to vary by attorney.
- Good Faith/Earnest Money: While it can vary, the buyer will commonly put down about 1% of the purchase price as their earnest money at the time the purchase agreement is signed here in the Lake Norman area.
- Due Diligence Fee: This is a NON-refundable fee that is paid directly from the buyer to the seller as soon as the offer has been fully signed/executed by all parties. The amount/fee is optional and is negotiated during the offer process between the buyer and seller.
- Due Diligence Period: This is the time period during which the buyer will investigate the property, do inspections and get their loan approved. This time period is negotiated on the Offer to Purchase and Contract form and this time period is Time Being Of the Essence. During this time period the buyer can walk away for any or no reason at all and the seller must return the earnest money deposit. However, after 5:00pm on the deadline of this time period if the buyer hasn’t canceled the contract in writing then the seller may keep the earnest money if for any reason the buyer can not close the purchase. Please ask for a copy of the Offer to Purchase and Contract to learn more before entering a purchase agreement!
- Modification of language and all amendments must be approved by attorney: As licensed brokers/agents in the state of North Carolina, we are taught that we can only “fill in the blanks” of all of the forms provided to us by the North Carolina Bar Association and the North Carolina Association of REALTORS. There are no blank lines in the contracts for us to use to add verbiage and there is no addendum with blank lines for us to use. On occasion we may draw up an addendum but we must get it approved by an attorney.
- Counter Offers: We have no counter offer forms, which is probably my biggest complaint. If a seller wants to modify the terms of the original offer, they either cross out the terms to be changed and write in their own and initial, or, the agents verbally communicate the counter offers until there is agreement and then a new contract is written up incorporating all of the agreed upon changes. During this time the original contract is void. My greatest concern is that any time before the seller and buyer sign the final contract, if the seller gets another offer they are not bound to sign the one already negotiated so there is a window of time when we are working in good faith. In the meantime, I keep lobbying for a counter offer form!
The above is only meant to be a general summary and an overview of how the sales process is customarily handled here. I am by no means an attorney so while I will try to address any questions or comments, if you have legal questions I can also provide you with the names of several very good real estate attorneys.