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What measure should be taken if I pay my DD fee to the seller by check and 5 days before closing they bring to my attention that they have lost the check and now want a cashier's check? To do this I have to pay to stop payment on this check and now have to pay a fee to acquire a cashier check. What are my rights with issue?
As an EXAMPLE of how the NC contract with the due diligence works:
Buyer finds a home that is priced $100,000. My buyer gives a $100 Due Diligence Fee to the seller, once we are under contract. Check is made payable to the seller and he cashes the check. We have a Due Diligence period of 3 weeks and we are closing in 4 weeks.
During the due diligence period, we do our inspections, buyer get loan approval, home appraises, attorney searches title, etc..
During the due diligence period, buyer can change his mind at any time and all he has lost is his $100 due diligence fee. However, he will also lose any funds he has paid like home inspection, etc.
At the END of the due diligence period, buyer decides he wants to continue with purchase. He then gives a earnest money deposit of $1,000. We have 1 week until closing. During this time, if buyer changes his mind, he loses $100 DDF and $1,000 EMD.
At closing, $100 DDF and $1,000 EMD are credited back to buyer.
One of the advantages of the Due Diligence Fee is that if buyer doesn't like what shows up on inspection and seller doesn't agree to repairs, buyer can walk away and there is no "fight" over earnest money deposit, since it hasn't been given.
My EXAMPLE is how I like to do it, for my buyers. Of course, when I'm the listing agent and working for my seller, I try to get more DDF and more EMD! And...these figures are just examples of what I do. These amounts are negotiable between buyer and seller.
I hope this makes it somewhat clearer and those that don't understand this will start to understand.
If I were the listing agent and someone asked my sellers to take their home off the market without a DDF or EMD, I'd advise my seller to counter. Hopefully, that buyer would understand how the RE market works in this area. Unexperienced/uneducated buyers need to understand what is "customary" for their area or they end up just looking foolish.
Vicki
Excellent explanation, thanks! I'm sure this will help lots of people relocating to NC.
I can't rep you again but, I like the idea of paying the Ernest Money at the end of the DD period. It makes more sense. I'll try that strategy from now on.
Although the check may be handed over earlier, the earnest money is not in the seller's hands, is it? Our agent holds earnest money for the seller, and if the buyer changes his mind before the end of dd, he has no problem getting it back.
So really it doesn't make any difference, except that earlier earnest money at least proves the buyer isn't completely broke. (I realize that's not its purpose.)
Although the check may be handed over earlier, the earnest money is not in the seller's hands, is it? Our agent holds earnest money for the seller, and if the buyer changes his mind before the end of dd, he has no problem getting it back.
So really it doesn't make any difference, except that earlier earnest money at least proves the buyer isn't completely broke. (I realize that's not its purpose.)
In NC, the earnest money deposit is usually held in a trust account by the listing agent's company.
If there is a seller saying HE gets the Earnest money and a buyer saying he gets the earnest money, it can't be handed over, no matter who is holding it. It is the law.
Therefore, paperwork must be signed, showing agreement betweeen seller and buyer as to who gets the earnest money, so the due diligence concept eliminates that issue. The contract details who and what!
This is NC. Not sure about other states.
Vicki
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