North Carolina Offer To Purchase Changing January 2011---Due Diligence

As I have been writing about the changes to the North Carolina offer to purchase contract; this one is one that for me and many Realotrs I have talked with about the changes offers the largest gray area for us. It is the due diligence period and due diligence money.

Under the current offer to purchase contract there is none. The buyer has certain dates set up throughout the contract for which they are required to make loan applciation, perform inspections and get loan approval. Each of them has an escape clause (so to speak). The new one removes all those phrases form the contract and replaces them with due diligence.

The question that I and many of my fellow Realtors have is what is an acceptable time period? There has never been any concrete dates put in on the old contract. However; there was always an acceptable practice as to what the "norm" became among fellow Realtors. What constitutes an acceptable time frame? The key here is that the home is going to be, in essence, off the market for that period of time. Are sellers going to want their homes off the market for 30 to 45 days? If so, what is it going to cost the buyer to do that?

Becasue part of the due diligence is a due diligence fee. This is a NON-REFUNDABLE amount of money that the buyer is going to give the seller to take their home off the market while the buyer performs the necessary inspections, has the bank process the loan and get an appraisal done on the home.

During the class that was taught in regards to the changes coming out; it was implied that the due diligence period would be up to 3 to 5 days prior to closing. Well, considering that depending on the type of loan you are applying for that period could be anywhere from 30 to 60 days to close a contract from acceptance. That is a long time period without some substantial money put down to protect the seller.

Time will tell on what the sellers and buyers end up taking as a norm in regards to a due diligence fee and time period. But for now; make sure your Realtor is negotaiting on YOUR behalf. That due diligence time period and fee can be a costly mistake.....

Dave diCecco
Realtor/Broker
www.davedicecco.com

North Carolina Offer To Purchase Changing January 2011---Inspections

Yesterday I began a series of changes that are going to be part of the new offer to purchae in North Carolina. One of the changes is the home inspection. Under the current offer to purchase contract the buyer has the choice of choosing one of two alternatives when presenting an offer to a seller. Generally, most buyers chose the first option due to it's simplicity. Basically, it reads that you (the buyer) agreed to do an inspection by a certain date. Within a specified time period from that date the you provided the seller with a list of repairs you wished to have performed on the house prior to closing. The seller had to respond to your request or negotaite them. If the estimated cost of the requested repairs exceeded a certain dollar amount negotaited in the contract the buyer could walk away from the transaction and be entitled to a full refund of their earnest money. It gave the buyer numerous outs of which to use to get out of a contract based on a home inspection.

Under the new offer to purchase their is no inspection period. The due dillagence fee that is negotaited up front gives the buyer the right to have the inspection done on the home. If the buyer elects to walk away after the home inspection they can without any reason. All they lose is the due dilegence fee. However; eventhough there is no stipulation for repairs to the contract; the buyer has the right to ask the seller for any repairs. Like any other part of the contract they have the right to negotaite the repairs out during the due dillegence period.

Now, on bank owned homes or short sales where the home is being sold "as is', the rules will be a little different. The unofficial chatter iS that the banks homes being sold through short sale will not have any due dillegence fee. The banks have their own addendums that they will create upon acceptance of a contract and the short sales have an unknown time frame attached to them for when it could be negotiated. The banks presently offer the buyer once a verbal acceptance of a cotnract is made 7-10 day window to have the home inspcted and elect to follow through with the transaction or walk away. Everything I have heard is saying that is not going to change.

They way I see this working is like a pendulum. When the market favors the buyers (as it does currently) the seller will probably be more inclined to perform the repairs on the house (as long as they are reasonable). In a sellers market (like we have back in 2006 and 2007) the seller would probably be less inclined to perform all the repairs requested; if any. In a balanced market reasonable repairs will probably be performed by the seller.

Dave diCecco
Realtor/Broker
www.davedicecco.com

North Carolina Offer To Purchase Changing January 2011

North Carolina has decided to make some dramatic changes to the offer to purchase contract starting with any offer written after january 1, 2011. these changes are suppossed to be for the better. However; time will tell how these changes help or hinder sellers and buyers.

North Carolina has been a state of contingencies and various dates for certain criteria to be met. It has changed to a due dillegence contract. What it basically menas for the buyer is you need to make sure that you can close on the house and ALL inspections, appraisals, and loan conditions are satisifed within the set time period you and the seller agree upon. If not, you will lose your due dillegence fee you gave ther seller upfront and possibly your earnest deposit depending on the time.

Under the new contract; the seller and buyer agree to terms on a sale price and any concessions. They have also agreed upon a set date for which the buyer has exclusive right to have ALL inspections performed, appraisals done, and any loan conditions met. if at the end fo that due dillegence period the buyer wants to walk away; they can for ANY reason. All they lose is there due dillegence fee.

However; after that period the buyer is required to put down an earnest deposit. That deposit now becomes completely NON REFUNDABLE. If for any reason the buyer backs out of the contract; they lose 100% of that money. If the seller cannot convey a clear title to the buyer though; then the money is refundable (as long as no fault of buyer home cannot close).

There are many changes to the new offer to purchase which can affect how an offer is negotiated and finalized. Make sure your Real Estate agent is aware of the changes and has explained them to you in full detail...

I will blog a series on the changes that are in the new offer to purchae contract.

Dave diCecco
Realtor/Broker
www.davedicecco.com

Financing A Fannie Mae Foreclosed Home

Everyone looking to buy a home right now is thinking a foreclosure is the best alternative. In some cases it is; and others it is not. I wrote a blog yesterday talking about where to look for foreclosed homes and the types of foreclosures out there. One of the largest selection of foreclosures is Fannie Mae properties.

Fannie Mae properties are homes that the government has backed from various banks and institutions in order to keep the banks cash flow liquid enough to maintain home loans and interest rates at reasonable levels. So, when one of these homes that they have backed goes to foreclosure they in turn begin the process of selling it on the market.

There are a few options availble when you are looking to buy a Fannie Mae home. One is they have a website that lists all of their homes for sale. You can visit www.homepath.com and view a complete list of all Fannie Mae homes on the market currently.

In addition, you will see advertsied on their homes that they either qualify for homepath mortgage or homepath renvoation mortgage. What does this mean to the buyer? A homepath mortgage means that the home does not need an appraisal. The home can be purchased without an appraisal since it quailfies under their guidleines. The process is quicker and the downpayment requirement is only 3% for owner occupants. In addition, unlike FHA, you do not pay mortgage insurance. Not all banks participate in the program. So you need to check with your lender to see if they are a particpating lender for this program.

The other program is homepath renvoation mortgage. This is one where it is determined that the home in it's present condition is not suitable for a reasonable person to live in without some reparis being done. The reparis can be minor and cost a few hundred dollars or be major and cost thousands. But this program allows the prospective home buyer to finance the cost of the repairs into the mortgage. So, you are purchasing the home in the present condition with the cost of any reparis needed being added to that mortgage amount.

Just becasue you are purchaing a Fannie Mae home does not require you to use their mortgage option. In fact, you can buy a Fannie Mae home and use any type of financing you wish (as long as the house will qualify) for that type of finance option.

There are options availble to you when you are looking to purchase a foreclosed home and you need to be aware of the options availble to you. Not everyone will qualify for all the programs. However; not knowing is worse than knowing and not being able to.

Dave diCecco
Realtor/Broker
www.davedicecco.com

Where To Look For A Foreclosed Home For Sale

Today I talked with a few people who are in the beginning stages of looking for a home. They all asked about and wanted more information about foreclosures. As the market for these types of homes still increases buyers need to know how to go about looking at and purchasing a foreclosed home.

Currently in the Charlotte market area foreclosed sales make up about one third of all sales of homes. Not as dramatic a number as some would have thought. One of the biggest surprises is the ease of dealing with the bank and the process involved.

i highly recommend if you are going to purchase a foreclosed home hire yourself a buyer's agent. A buyer's agent will work for YOU and look out for your best interest in the transaction. The best part of it is the bank will pay them their fee and it cost you nothing.

With that, there are really three type of foreclosed homes on the market today. The first, and most popular one is the bank owned homes. These are homes the bank has taken through foreclosure and are reselling them to recoup some of their losses.

The second ones are the Governement owned homes through Fannie Mea and Freddie Mac. These are the two government back securites that purchased a lot of the bad loans from the banks so that the banks could start lending money again. They also buy a good portion of the mortgages out there to free capital for banks.

The third one is the HUD homes. These are homes that are owned by the federal government becuase the loans were backed 100% by the government when they took them out.

The process is really no different than if you were looking to buy a home from a seller who was not in foreclosure. The banks and the federal government advertise their homes on the market through a listing agent who will present the offer to the bank. The listing agent works for the bank and acts as the eyes and ears for the bank for the home. They can tell them the market conditions and the overall condition of the house.

The same websites you find the homes for sale by homeowners are advertsing the homes for sale by the bank. The difference is to know what to look for. This is where a Realtor can come in very helpful. You have access to the same information we do. We tend to know certain verbage that indicates a home is bank owned or not. Also, just becasue a home is foreclsoed does not mean it is going to be on the market for sale right away....


Dave diCecco

Realtor/Broker

www.davedicecco.com