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When is a property SOLD?

By
Real Estate Agent with Pine Knoll Shores Realty 252-422-9000 NC 166249

When is a property SOLD?

 

 

Your neighbor said he sold his house but months go by and he’s still there.  What happened?  Real estate sales go round and round and what was true at one time may have no basis in reality today.  The truth is, in real estate, nothing is truly sold until it is recorded at the courthouse.  There was a time when a contract to purchase almost always ended in a closing. That is no longer true.

In January, 2011 all residential real estate contracts in North Carolina added a due diligence clause.  For a period of time after the signing of a contract, buyers now have the right to walk away from the contract without penalty for any reason or no reason.  The length of the due diligence period is negotiated between the buyers and sellers but is typically between thirty and sixty days. 

This due diligence period was put in place to replace several addendums including the repair request addendum, the financing addendum and others.  It was designed to give buyers time to do any inspections they wanted to do, put their funding in place, secure surveys, appraisals and any other studies they wanted and negotiate any repairs or concessions they might want from the sellers.

Unfortunately, too many buyers are using the due diligence period more like a “Lay-A-Way” time where they have a secured contract but no obligation to the seller.  For sellers, it creates a very stressful situation.  Until the due diligence period is over, the seller is living in limbo.  I’ve been involved in several contracts in which the “buyer” simply saw a different property come on the market and walked away from the contract.

As a REALTOR® I have felt empathy for sellers under this new system, but until recently was really unaware of just how frustrating it is for sellers.  Since my husband and I have recently “sold” our own home, we know first-hand how it feels from the seller’s perspective.  We have now survived the due diligence period and fortunately for us, the buyers and their agent have been considerate of our feelings so it has not been as hard as it might have been. 

In order for the due diligence contract to work, buyers should only enter into a contract if they have truly explored their options and the market and are acting in good faith.  Once a contract is in place, the buyer should order all his inspections, line up his money and be ready to move forward.  Once all his due diligence is complete, even if the time has not expired, it would be thoughtful of him to go ahead and let the seller know he plans to move forward.

Sellers should insist that there be enough time between the due diligence period and the closing so that they can make their own arrangements after the due diligence period has passed.

And here’s a thought:  Buyers and sellers, perhaps this is a good time to practice the REALTOR®’s code of ethics.  You may know it as the Golden Rule.  “Do unto others as you would have them do unto you.”

Comments (24)

Lorrie Semler, REALTOR® in the Dallas area. Call/text 972-416-3417
HomeSmart Stars - Addison, TX
Real Service. Real Results. Real Estate

In Texas, it's called the "option period" and it happens well before closing. The option starts the day after the contract is executed and lasts for a negotiated period of time, usually 7-10 days. The buyer has the unrestricted right to terminate for any reason. After option is over, the status is changed to "pending" in MLS. The home is considered "sold" after closing and funding.

Apr 27, 2013 02:23 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

We have "outs" in our contract, but there is a much smaller window than that.  Of course, you say it's negotiated.  And when is a property SOLD -- when the loan funds and the deed records.  Other than that -- it's pending.

Apr 27, 2013 02:26 AM
William Johnson
Retired - La Jolla, CA
Retired
Hi Marian, Excellent post. Since this is negotiated, it would be incumbent on the Listing agent to negotiate that number of days for Due Diligence" to a reasonable number. And by reasonable I mean, an enthusiastic Buyer that has their stuff together and is ready to buy the property. Otherwise...."Next". We have a 17 day default to complete all investigations including appraisal and final loan approval. The default time frame is fine but with numerous Buyers for the same property, Sellers can also negotiate to shorten this period up, still giving ample time for investigations. The Pre-approval letter that Lenders throw around that don't mean much any more, originally had the lender committing to the Buyer for financing. Now, with underwriting guidelines as murky as a polluted river, either the Buyer is going to risk their earnest money deposits for not having a clear commitment or the Sellers are going to risk being off the market and perhaps losing other doable offers. The Sellers own the property and the Buyer want it. The question then becomes " how much , do they want it" Enough to risk? or Not. This is what the agent for the Seller is to help them ascertain. Weak offers are just that. A shot in the dark. Security of the transaction comes at least partly from the Listing agent doing his job to help the Sellers determine the quality and value of the offer.
Apr 27, 2013 02:40 AM
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

I would think you could set a deadline for the Due Diligence period ( like less than30-60 days), and if buyers fails to perform inspections, contract becomes void? Sounds like having a back-up contract would be a good idea in NC.

Apr 27, 2013 02:59 AM
Kathy Stoltman
Balboa Real Estate - Ventura, CA
Ventura County Real Estate Consultant 805-746-1793

This long length of "get out of contract" would never fly here. The most a buyer by default can have is 17 days, yes this is a negotiable term, but with our hot market, no agent in their right mind would advise a seller to accept a longer contingency period.

Apr 27, 2013 02:59 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

I guess I just don't quite understand the NC due diligence period of 30-60 days.  What could have caused a regulation like that and more importantly think it was going to make things better? !

Apr 27, 2013 04:00 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC
Hey Roger. Thanks for stopping by. No, it was never intended to be used this way but sadly, some people are taking unfair advantage.
Apr 27, 2013 05:18 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC
Debb, I "dislike " too. I wish it would go away.
Apr 27, 2013 05:19 AM
Liz and Bill Spear
Transaction Alliance 513.520.5305 www.LizTour.com - Mason, OH
Transaction Alliance Cincinnati & Dayton suburbs

Marian, Our contract is specific, a time frame for HOA review, a time frame for inspections and negotiations, and then a deadline to complete financing.  For the most part inspections are the only place we may have things break apart.

Apr 27, 2013 06:03 AM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I can see both sides to this senario.  I think there has to be a reasonable time for due diligence... Buyers should be reasonable... on the other hand, sellers should be honest about the condition of their home.  There sometime are abuses on both sides.

Apr 27, 2013 11:45 AM
Bryan Robertson
Los Altos, CA

I can't imaging having a period of time that long to back out.  In California, it's unheard of to go beyond 17 days and most contracts these days are 14 days or less (max with financing).

Apr 27, 2013 02:11 PM
Gary Frimann, CRS, GRI, SRES
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker
It is sold when escrow closes (unlike the postcard I got in the mail today on a house listed by an unscrupulous agent) who claims his currently pending listing was sold in 7 days...
Apr 27, 2013 02:39 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
Marian - 30 to 60 days sounds like an awfully long time when most of our escrows are 30 days.
Apr 27, 2013 03:47 PM
Beth and Richard Witt
New York, NY
The best Retired Brokers !!!!

Thank God we don't have this due diligence thing in NY.... We do have to deal with lawyers and the Mortgage issues but once a house goes into formal contract as long as the buyer has a Pre-Approval from a reputable lender we usually close with-in 90 days... Use to be much faster but the more laws we have the longer it takes... Good post thank you

Apr 27, 2013 08:53 PM
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

I can see why you would need 30 + days when inspections include well and well water, septic tank and drain field, home, radon, lead paint or some other potential hazard, underground fuel tanks, etc.

Apr 27, 2013 10:46 PM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

Hello Roger S.  Yeah, we really need more legislation.  NOT! Thanks for your comment.

Apr 29, 2013 01:21 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

Lenn, If the buyers would put up significant due diligence then that would certainly help the problem and that's how it was designed and presented to us, the REALTORS.  However, buyers don't want to pay anything and the market here is still so sluggish that sellers and their agents are reluctant to reject an offer without it.  It's a vicious cycle.

Apr 29, 2013 01:23 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

Lorrie,  Our MLS system requires us to post our properties "PENDING" as soon as we have a contract despite the fact that it may very well fall apart during the due diligence period.  I really appreciate your comment and will now start working to get our MLS rules changed.

Apr 29, 2013 01:30 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

Carla,  You are right of course, now if we could get everybody to understand that.  Pending is not SOLD.

Apr 29, 2013 01:32 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

William, You're right of course but sadly too many of our sellers are so desperate right now they will agree to rediculous terms and hope it holds together despite their agent's advice to be a little tougher.  

Apr 30, 2013 01:06 AM