Due Diligence - New Burdens on Buyer’s Agents

January 1, 2011 our world will change. Sellers, buyers and their agents will have new “Offer to Purchase and Contract” forms. Gone will be the contingencies that have added stress to everyone in a residential transaction. A lot of the members of the Neuse River Region Association of Realtors enjoyed a Continuing Education event with Bill Gallagher ( http://www.superiorschoolnc.com/ ). He taught the group assembled the features of the new contract adopted by NCAR.




The new contract will have a new feature called a “Due Diligence” period. This period resembles an option. It differs in that all of the terms of the final contract are included in one document. With an option the buyer gives notice that he will exercise his rights and contracts to close. With our new contract it will be assumed that a closing will occur. The buyer, in this new contract, will have to notify the seller if they do not plan to close. The buyer will use the diligence period to firm up a loan commitment, obtain an appraisal, perform inspections and determine if they want to proceed. The fee to compensate the buyer for this period of time will apply to the purchase price. Like an option fee it will be nonrefundable. A traditional earnest money deposit becomes “at risk” if this date passes and notice is not given for the buyer to withdraw.



This creates a new burden for Buyer’s Agents. The day of the free “look-see” is over. If the buyer determines that it is in their best interest not to complete the transaction money will be lost. If notice is given during the diligence period the loss will be limited to the “due diligence” fee and other expenses that have been prepaid. If the sale does not close after this period the earnest money will also be lost. Buyers will be unhappy if they lose significant sums of money on an incomplete deal. The competent buyer agent will attempt to assist his client to avoid a transaction that fails. The buyer will need to be educated in a variety of subjects prior to making an offer. Guiding them through the mortgage process will be key. It will be essential to have a pre approval from a lender who closes loans on time. Helping clients obtain and interpret the appropriate inspections will be important. Keeping track of the “Time is of the essence” dates will fall upon the buyers agent. Wisdom will need to be exhibited to avoid beginning a purchase on a property that will create appraisal and inspection problems.



I believe a buyers agent who does a good job will enjoy a greater loyalty from the client. It will be a tense time if the buyer decides to walk and absorb a loss. Over all I believe the new contract will cause our industry to become more professional .

by Gary Barker


Gary has been selling real estate in New Bern since 1977.

Visit my website http://www.gary-barker.com/