Special offer

NC Contract Changes - Change is Good!

Education & Training

Changes are about to hit us in North Carolina.  The North Carolina Association of REALTORS and the North Carolina Bar Association review and make changes to the North Carolina Agreement to Purchase and Contract every year.  In 2011, however, the changes are significant.  Very significant.

If you've purchased a home in North Carolina before, you are used to the concept of signing a contract, then having the inspection done and then "renegotiating" with the sellers for repairs on items that are not "performing the function intended" or are "in need of immediate repair".  There were also contingencies for financing, etc., all of which usually allowed the buyer an out if he tried hard enough.  This process sometimes led to earnest money disputes.  Well, forget that process.

There's a new sheriff in townPicture of sign that says CHANGE, and he's trying to throw out earnest money disputes!

1.) Due Diligence Period

Buyers now have a "due diligence period" in which to do their research on the home they want to purchase.  When the contract is signed the due diligence period starts.  During this period the buyer needs to do inspections, appraisals, insurance review, surveys, review HOA documents, and perhaps most importantly, loan qualification and approval.  Before the due diligence period is over, the buyer may opt to terminate the contract "for any reason or no reason", and receive ALL their earnest money back.  However, their due diligence fee is forfeited.

During this due diligence period the buyer and seller are under contract, so the house is effectively off the market, although the seller can still pursue backup offers.

2.) Due Diligence Fee

The above due diligence period comes with a cost to the buyer.  The buyer must now provide a "due diligence fee", written directly to the seller, which is a non-refundable fee.  The seller is allowed to cash the check immediately.  So, the buyer is essentially purchasing time to evaluate the property, and paying for the time the house is off the market with the due diligence fee.

The only time the seller is required to return the due diligence fee is when the seller is in material breach of the contract, most likely due to the seller changing their mind about selling or being unable to provide clear title to the property.

The new due diligence fee does apply to the purchase price of the house at closing.

3.) Earnest Money

The buyer still also provides earnest money.  Prior to the end of the due diligence period this money is returned to the buyer if the contract is terminated.  After the due diligence period is completed the seller gets to keep the earnest money as liquidated damages if the buyer does not close on the home.  The big difference to the buyer is that if the buyer's mortgage company decides not to give the buyer the mortgage, the buyer now forfeits the earnest money if the mortgage company makes this decision after the due diligence period.

4.) Repairs

In the old NC contract, the seller was required to deliver the home where all the systems in the home were "providing the function intended, and not in need of immediate repair".  This caused many disagreements, because what is in need of "immediate repair" is not always clear cut.

In the new contract the seller makes no agreement to the working condition of anything in the house.  However, if the buyer isn't happy about items that come up during the inspection, the buyer can easily walk, so it's not necessarily a free ride for the sellers.

We will still have a renegotiation before the end of the due diligence period.  The difference is that there is no longer any expectation of what should or should not be covered.  The buyer and seller will make this determination from scratch on every deal.


The goal of all these changes is to provide a contract that will be clearer to follow, have fewer dates to keep track of, and hopefully have fewer disputes.  Time will tell if the NCAR and the NCBA have achieved these goals.

If you are looking to buy or sell a home, please give me a call and I would be happy to discuss these changes and how they may affect your specific information.

Posted by


Ken Gramley
Fonville Morisey Realty
1149 Kildaire Farm Rd
Cary, NC 27511

(919) 414-1961

Try the most innovative subdivision search around!