Deanna Valeo
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Due Diligence – the New 2011 NC Real Estate Contract from the Lender’s Side:

"No person who is enthusiastic about his work has anything to fear from life." Samuel Goldwyn

The new NC Purchase contract which will go into effect January 1, 2011 requires a buyer’s Realtor to name a period of time for the buyer to get fully approved for a loan, inspect the house, and make sure there is clean title. This is called the “due diligence” period for the buyer. The consequences of any failure such as: low appraisal value, unable to qualify for financing, large inspection issues, and title defects found after this negotiated time will result in the buyer losing their earnest money to the seller (at a minimum). 

The addition of the due diligence period will spark a campaign to “educate” Realtors on the appropriate time needed to get through loan approval. Many big-box lenders will be quoting longer period of times to accommodate their processes and mortgage brokers really will have issues as they do not have control over their lenders’ processes.

This is where a mortgage banker will have an advantage. Since we table fund our loans, have our own underwriting staff, processing staff, and closing department we have the necessary knowledge to get your client through the due diligence period without surprises. We feel very comfortable with 30-days on most borrowers – with the right buyer we may even be able to accommodate faster turn times.

Many listing agents I have spoken to state they are uncomfortable giving more than a 30-day due diligence period. Most also state they will not be asking for a due diligence deposit, rather they will be staying with earnest money deposit (of course the agents I spoke to expect this to change as the market flips from a buyers’ market to sellers’ market.).

The simple fact is that the client can walk away for any reason during the due diligence period. Therefore, the shorter the due diligence period the better for the buyer’s agent .

Faster due diligence periods should mean a competitive advantage for your buyer.

One strategy to help your buyer be more attractive to sellers ,and perhaps get a better negotiated price, will involve getting your buyer in with the lender for a face to face meeting earlier for a full pre-qualification. This means getting income documentation in house early in the process along with assets; additionally we can save 2-3 days by having all disclosures signed that day.

A true pre-qualification will allow us to shorten the due diligence period for your buyer – making them more attractive to the seller of the property.

(Excerpt from the new NC contract: Page 3)

4. BUYER'S DUE DILIGENCE PROCESS:

(a) Loan: During-the Due Diligence Period, Buyer, at Buyer's expense, shall be entitled to pursue qualification for and approval of the Loan if any.

(NOTE: Buyer is advised to consult with Buyer's lender prior to signing this offer to assure that the Due Diligence Period allows sufficient time for the appraisal to be completed and for Buyer's lender to provide Buyer sufficient information to decide whether to proceed with or terminate the transaction.)

Something to consider: If you are in the process of buying the house and issues arise such as back-ups with House Charlotte or USDA underwriting, you can always re-negotiate the due diligence period.

FHA and VA loans: if the appraisal does not come in at value the buyer will still be due a refund of their earnest money even if the due diligence period is expired. This is per Federal Law and per the new contract cannot be superseded by NC Law.

Please know that the Valeo-Croy Team has the expertise to help guide your buyer through the process of getting approved prior to the expiration of the due diligence period.

With our communication and expertise in programs we can also help to guide you and your client if extensions are warranted due to back-ups in loan processing beyond our control. Our goal always is to have an on time closings. This now means an on-time approval for our clients to meet the expectations of the new NC real estate contract.

All our best for the upcoming week. 

@ The Valeo-Croy Team, we are here for you.

 

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                              
 
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The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 11/15/2010

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