5 Key Contract Terms Every NC Homebuyer Should Know

By Chip Free

Chip Free is a seasoned real estate advisor with Lake Realty, a locally established firm in Lake Norman that his father founded over 30 years ago.

Buying a home in North Carolina can be exciting, but navigating the real estate contract can feel overwhelming. If you’re preparing to make an offer, it’s essential to understand a few key terms that could make or break your deal. Today, I’ll walk you through five key terms that are part of every home purchase contract. These terms will not only protect your interests, but also give you a better chance at negotiating a clean contract, free from confusing contingencies.

The Purchase Price: This is the amount you’re offering to buy the home for. It’s straightforward but crucial. Getting this right is key to setting the tone for the rest of the negotiations.

Due Diligence Fee: This one can be tricky. The due diligence fee is a nonrefundable payment you give to the seller to take the home off the market. It allows you to perform inspections, appraisals, and secure financing. This fee goes toward your purchase price if everything goes smoothly. But, if you decide to back out for any reason before closing, you lose this money. So, make sure you’re serious before handing over this fee.

Due Diligence Period: This is the time you get to inspect the home, check for issues, and get your finances in order. During this period, you can back out of the deal without losing your earnest money deposit. It’s your “get-out-of-jail-free” card, so use it wisely.

Earnest Money Deposit: This deposit shows you’re serious about buying the home. Unlike the due diligence fee, this money is refundable if you decide to back out during the due diligence period. If you cancel after the period ends, though, you lose both the earnest money and your due diligence fee.

Closing Date: This is the day you officially become the owner of the home. It’s the finish line, where all the paperwork is signed, the money is transferred, and the house is yours.

So, how much money should you offer? These terms are negotiable, and you’ll want to be strategic. Before the pandemic, buyers typically offered about 1% of the purchase price for the due diligence fee and earnest money deposit combined. For example, if the home costs $500,000, you might see $5,000 split into $1,000 for the due diligence fee and $4,000 for the earnest money deposit. However, during the pandemic, these fees skyrocketed due to competitive bidding, and while they’ve settled down, they still play a major role in negotiations.

When you’re submitting an offer, think about the condition of the market. How long has the house been listed? Is there competition? These factors can all affect the fees you’ll need to offer.

Understanding these five terms is just the beginning. By familiarizing yourself with these terms and knowing how to negotiate them, you’ll set yourself up for success. If you have any questions, feel free to call or text me at 704-806-2410.