Welcome back to this blog series about how to buy a house in Charlotte, North Carolina. Last week, in part 1 we discussed financing (get pre-approved by a lender) and looking for homes for sale. Today I’ll teach you about the negotiable items to consider when you write an offer to purchase property. This topic is often the most nerve-wracking when trying to buy a home for sale but hopefully I can ease your mind and simplify the process for you.
Step 3 - Writing an Offer
Once you have found that home for sale that you want to buy, you’ll likely want to move quickly to write an offer. If you haven’t already been pre-approved by a lender, I advise that you contact your lender to make sure it all adds up and the financial side of buying a home doesn’t come as a surprise. You may also want to ask your lender for a pre-approval letter directly stating that you can purchase that particular piece of property at the sales price you’re offering.
While you are waiting to hear back from your lender, work with your agent to write an offer to be the most productive. As of today, the North Carolina Offer to Purchase and Contract is 13 pages. There are several items which are commonly negotiated upon between buyer and seller:
- Purchase Price – pretty straight forward, I’m sure you understand this one
- Due Diligence Fee – the amount of money you’re offering, directly paid to the seller, for the seller to take their home off of the market allowing you to conduct inspections, appraisal, and title search. If you decide to terminate the contract for any reason prior to the due diligence period, this fee will NOT be returned to you. At closing, this fee will be taken off the sales price of the home (ie – sales price is $200,000 and due diligence fee is $500, amount due at closing is $199,500). Usually the higher the due diligence fee, the more confident the seller is that you will follow through with the sale.
- Earnest Money Deposit – the amount of money you’re offering, usually paid to your agent’s firm (or the escrow agent) for the seller to commit to selling to you. This deposit also says how committed/serious you are about following through with the sale. Like the due diligence fee, the earnest money deposit will be taken off of the sales price of the home (ie – sales price is $200,000, the due diligence fee is $500, and the earnest money deposit is $5,000, the amount due at closing is $194,500).
- Due Diligence Period – the date at which the due diligence period expires. Whatever date is entered here, you will have until 5 pm that day to complete all inspections, appraisals, survey, title work, and other such things that may make the property unappealing to you. Repair negotiations will also need to be settled by this time. Regardless of what has been found or what has not been done on your part, once this time passes, terminating the contract becomes much more difficult and you will not only lose the due diligence fee but you will also lose the earnest money deposit. I would usually suggest at least 25 days for your due diligence period but a shorter due diligence period is preferable to the seller.
- Settlement Date – the date on which you will close and purchase the home. If for some reason you, the lender, or the seller are unable to close on this date, a 14-day grace period is automatically given but is rarely used.
- Fixtures and Exclusions – fixtures are items that are typically considered to be part of the property (ie – blinds, drapery rods and hardware, dishwashers, chandeliers, etc.). The seller may not want to leave these fixtures in the home. Other items, like refrigerators, washers, and dryers, are things that you want to be left in the home and will purchase along with the property.
- Assessments – costs associated with the upkeep of either the community or of the property itself but paid for by the HOA (or sometimes the city). Assessments are things like paving the street, replacing the roofs, or any other projects that are covered by the regular dues. Many times sellers will agree to pay for assessments that have already been confirmed, but not necessarily started yet while the buyer will pay for proposed assessments that are still being discussed amongst the HOA.
- Closing Costs – how much money the seller is willing to give to the buyer to help pay for closing costs like attorney fees, deed recordation, title search, and other charges associated with initiating a loan. During the due diligence period the seller may offer to give money for closing costs in lieu of making repairs.
- Home Warranty – a generic plan ordered from an outside company warranting the property against common problems that arise. Sellers sometimes order a warranty on the home when it is put up for sale to attract buyers. When you close the warranty will transfer to you. If that hasn’t been done, the seller may offer to pay for a warranty plan of your choice which will go into effect when you close. Or, no warranty is offered by the seller. You can choose to still get a warranty but the seller is not obligated to pay for it.
- Additional Addenda – several different forms used only if needed for things like:
- Adding an expiration date and time to your offer
- Requesting repairs upfront before any inspections are done
- Getting a FHA or VA loan
- Stating that you will still need to sell your current home in order to buy this one (a contingency)
- Acknowledging that the home may or may not contain lead based paint (only if built prior to 1978)
With all of these items to consider when writing an offer and making sure that you are comfortable with the deal, while also presenting an offer that is appealing to the seller, it is incredibly valuable to have an agent who is knowledgeable, experienced, and a good negotiator. Once completing your offer, your agent will send it to the seller’s agent. The seller will then either accept your offer, counter it by changing some of the above negotiating factors, or, in rare cases, completely ignore your offer (maybe because they are offended by it). As soon as the terms in the offer are agreed upon, accepted and signed by both buyer and seller, you are under contract!
Check back on Wednesday to learn more about the Due Diligence Period as it relates to buying a home for sale in south Charlotte, NC!