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SECTION-01

REAL ESTATE TERMS 101

Due Diligence Period? Closing Costs? Don't get lost in the complicated jargon. Below is a quick and easy guide to some of the vocabulary you'll run into at the negotiation table.

01

Purchase Price

This is the amount you are offering to pay the seller for their home. Prior to submitting an offer, we do a thorough analysis of the property to determine what the fair market value is for the home based on the comparable properties that we see in the neighboring area. Note – realtors are not appraisers, so all analyses performed are approximations.

02

Due Diligence Fee

This is a fee that is payable to the seller immediately after all parties have agreed to terms and have signed the Offer to Purchase, thus creating an executed contract. This fee is effectively paying the sellers to take their home off of the market so that you can perform your ‘due diligence’ to determine if you would like to go through with the transaction. If you terminate the transaction (for ANY reason) prior to the end of the Due Diligence Period (see below) you would forfeit this fee to the seller. If you complete the transaction and close on the property, this fee is credited back towards your closing costs at closing. This fee is negotiable and can range anywhere from $500-$5,000+.

03

Initial/Additional Earnest Money Deposit

This is a deposit that is made payable to the closing attorney (Escrow Agent) assisting you on the transaction and will be held in escrow until closing. If you opt for Initial Earnest Money, the deposit is due within 5 days of executed contract. If you opt for Additional Earnest Money, the deposit would not be due until the day after due diligence expires. If you terminate the contract during the Due Diligence period, you would forfeit the Due Diligence Fee to the seller, but you would be reimbursed your Earnest Money Deposit. If you terminate the contract AFTER the Due Diligence Period expires, you would forfeit both sums to the seller as liquid damages for breaching your contract. If you complete the transaction and close on the property, this deposit is credited back to you at closing. This deposit is negotiable and can range anywhere from $1,000-$5,000+.

04

Due Diligence Period

This period constitutes the first 2-3 weeks (length of this period is negotiable) that you are under contract on the home. During this time, you will have access to run your inspections, appraisal, survey, repair estimates, etc. to determine if you would like to move forward with purchasing the home. The Due Diligence Period also allows you the opportunity to negotiate repairs with the seller. You can request the sellers to repair specific items from your inspection reports, request money-in-lieu of said repairs which would be credited toward your closing costs at closing, or some combination of the two. In North Carolina, real estate is sold AS-IS, so the sellers are not obligated to complete any repairs, but we find that as long as the requests are reasonable, sellers typically are willing to work with us. All negotiations for repairs must be agreed to and signed off on by both parties prior to the expiration of the Due Diligence Period.

05

Settlement Date

This is the date on which closing is scheduled to take place. We like to stick as close to this date as possible to avoid any hiccups, but the contract allows either party a 14 day grace period in which to close after the agreed upon Settlement Date. This most often occurs due to lender delays or repairs needing to be completed by the seller.

06

Closing Costs

In addition to the purchase price, there are other costs required to purchase a home, related to acquiring a loan, inspections, appraisal, etc. (see buyer agency agreement for complete explanation). These costs add up to about 2.5% of the purchase price. If you need to conserve cash for your down payment, you can normally finance these costs by agreeing to pay the seller this amount over-and-above the negotiated purchase price, in exchange for receiving a credit from the seller for this amount at closing to cover your costs. This is called “seller-paid closing costs”, but in reality they are “buyer-financed closing costs.”

07

Seller Paid Closing Costs

When negotiating your offer, you can request that the seller pays a portion of your closing costs. In our current market, it is rare to see this, but not altogether unheard of. The circumstances at the time of the offer will affect this option. For instance, if a home has several offers on the table and it is an extremely competitive scenario, asking for Seller Paid Closing Costs might make your offer less appealing than one that is not requesting this. However, if the home has been sitting on the market for a while and there are no other offers on the table, the seller might agree to this term.

08

Personal Property

This section identifies any items that are considered personal property that would convey with the home. Most often, this applies to the three appliances that do not automatically convey with the home – refrigerator, washer, and dryer. It would also include any other items you’d like that do not automatically convey with the home.

09

Home Warranty

Similar to Seller Paid Closing Costs, you can request that the seller pays for a transferable 12 month home warranty of your choosing, or the seller may have already agreed to offer one of their choosing. Again, the circumstances at the time of the offer will affect this option. Home Warranties typically cover the following – Plumbing, Electrical, Appliances, Cooling, & Heating (think the acronym PEACH). Each Home Warranty program offers different coverage options to best suit your needs. If you don’t request a Home Warranty to be provided by the seller, you can always elect to purchase a plan yourself after you close on the home.

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Call: 919.670.0022