I'm thinking of buying a house in Cary near my brother, not necessarily an investment, but of course I do want to get a good deal. I was planning on doing 10-20% down. Cary is very competitive. My agent suggested that I put 10% as my due diligence to win the property. This is before inspection and really before seeing the property except online. Now I know it's competitive, but I'm curious from someone that has experience in the area if this is normal and actually what it takes to win a property there or if it's just insane to put 10% as due diligence payment?
MLS data below shows signs of a cooling w. the decrease in % of selling price vs list price. As we head into the holiday (Thanksgiving is 10 weeks away) I think you may see houses sell for list price and DD back to a reasonable 1-2%. Meanwhile, there hasn't been a cooling of rental prices in this area as we continue to have a shortage of rentals.
Contrarian Investor · Greensboro, NC · Member since 2016 · 219 posts · 174 votes
5y
Scott, I guess the term “win” is relative. I think in the coming years if you interview those who “won” deals today, they probably won’t feel like winners. I recommend the book “Mastering the Market Cycle” by Howard Marks. And there was a YouTube video just posted this week called “Be Careful! #1 LIE in 2021 Housing Market” on a channel called Reventure Consulting which features the Raleigh market. But without knowing your exact situation it’s tougher to say. If you’re currently living in a bad school district and want your kids in a better school district or some other safety / life choice, you may need to compete in this market. But if you can wait, I think you’ll see a more buyer favored market in a few years. Best of luck!
Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
5y
"My agent suggested that I put 10% as my due diligence to win the property" - that's 50-100% of your down payment depending on which you go with, the biggest question is: are you willing to walk away from that $ if things turn sour? (inspections, etc.) Ultimately it's up to your comfort level.
"competitive" offer is subjective. You have to look at the entire offer "package" - not just the DD. Factor in PP, DD, EMD, PP period, contingencies, etc. - sellers & listing agents look at the overall package, not just DD. My two cents. Good luck with your home search in Cary! It's very competitive out here.
MLS data below shows signs of a cooling w. the decrease in % of selling price vs list price. As we head into the holiday (Thanksgiving is 10 weeks away) I think you may see houses sell for list price and DD back to a reasonable 1-2%. Meanwhile, there hasn't been a cooling of rental prices in this area as we continue to have a shortage of rentals.
Real Estate Agent · Wake Forest, NC · Member since 2015 · 66 posts · 54 votes
5y
It is almost a requirement in this market to offer a high DD, so it’s important that you know the status of your ability to close a loan - get pre-approved not just pre-qualified. In addition you want to know what condition your high cost repair items are in. So if the roof and HVAC have recently been replaced and it’s on city water and sewer than you can feel more comfortable putting down a high DD. Also get a home warranty, so that surprise repairs won’t nickel and dime you to death after closing. Many people are purchasing site un-seen in the Coming Soon period with high DD just to be able to get a home. It’s a crazy market, but does seem to be slowing slightly. I think that’s due more to school starting back than to any market change. Supply / demand will send it right back up in the Spring.
Real Estate Agent · Wake Forest, NC · Member since 2015 · 66 posts · 54 votes
5y
Private or community well and septic system. The vast majority of homes that are not within a city limits will have a private well and septic system. Some have community wells with private septic systems. Septic repairs can get expensive and there is no way to know what condition the system is in unless you have it inspected which of course you would not be able to do before going under contract.
That was a great response and put somethings in a better perspective for me, thank you very much! I would love to connect further if you had a moment as I am starting the process of looking into the NC area and would like to find out as much as I can. Thank you and have a wonderful day!
Real Estate Broker · Raleigh, NC · Member since 2017 · 18 posts · 7 votes
4y
@Suzanne Player I’ve had good experiences with Cinch Home Warranty here in NC. All home warranties are subject to the rules of the policy however. It is a business and they will always attempt to repair prior to replacing covered items.
Real Estate Broker · Durham, NC · Member since 2018 · 43 posts · 61 votes
4y
The short answer: it depends. But what your agent has said is not outside of the ordinary in the Triangle. You and your agent should be attentive during showings! Best of luck!
Rental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes
4y
I read this thread and saw your comment @Wayne Brooks about the EM & DD being subject to inspection etc. I don’t think anyone mentioned it here but in NC your DD$ is like your Ante in a poker game, you do NOT get it back! It is really an option fee that you pay for the right to exit the contract within a set period of time for any or no reason. But you don’t get it back! That is why it’s a big deal that people are paying $10/20k+ in DD. It used to be ~ $500.- for a nice house.
Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
4y
@Christian Hansen I would think that the paying of excessive due diligence money (ie, over $500) will change when the market cools down. Because, seriously, paying $2,000 for the privilege of finding out from the home inspector that the seller didn't take care of the property is excessive.
Realtor · Cary, NC · Member since 2020 · 1 post · 0 votes
4y
A way to view the due diligence fee, is that it is the fee paid to the seller to take their house off the market while inspections are being completed. They keep the fee if you terminate the contract, but if you complete the sale, it is credited to you at closing.
There are a few property inspection companies that will walk the property with you to offer opinions on the general condition of the home. It isn't a full inspection, but it offers insight before an offer is made.
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
4y
@Scott Calafiore that's where the market currently is on the retail side. You can get in touch with a Home Buyer like Wake County Home Buyers to see if there are any off-market deals.
Up to you, but that's the state of our market. Best of luck to you!
Rental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes
4y
@Suzanne Player I absolutely agree that it excessive but that is what is going on now and seems to be continuing, also $2000.- is low. For particularly hot areas $10K is not uncommon. Until the supply increases, demand declines or stories emerge of people getting seriously burned I don't think it will change much. Because buyers are so desperate to get a house under contract their agents are suggesting the high DD$ to get the attention of the sellers. I am not maligning the brokers they are simply telling the buyers what their options are. It's a very clear example of free market dynamics.
Real Estate Agent · Wake Forest, NC · Member since 2015 · 66 posts · 54 votes
4y
Suzanne, I know a guy who has recently been licensed as an inspector, who may be more available for that kind of thing. I have no idea what he would charge for it, but I can put you in contact with him if you are interested.
Lender · Charlotte, NC · Member since 2019 · 67 posts · 72 votes
4y
So I know this post originated previously, and while we aren't seeing the competitive offers to the extent they were a few months back, we are still seeing them. Make sure to align yourself with a lender who will help you structure your mortgage, in order to strengthen your offer outside of just high due diligence. Our clients have had some great wins in this market by utilizing an appraisal gap strategy. This basically means putting less down, and paying an upfront mortgage insurance premium. This allows the client to take the additional amount they may have had saved for a Down Payment, and apply it to their offer price. By doing this, it enables you to keep your total cash to close and monthly payment about the same, however it strengthens your offer much more. I realize this may be difficult to understand without specific examples. Happy to send one to you if interested. Just let me know!
@Christian Hansen I would think that the paying of excessive due diligence money (ie, over $500) will change when the market cools down. Because, seriously, paying $2,000 for the privilege of finding out from the home inspector that the seller didn't take care of the property is excessive.
$2000 was what it was before the market got crazy. Now it's easily 20k+ in a competitive offer situation. My buyers regularly offer 20-40k in DD because that what it takes, and they still don't always win. Prices are usually 5 - 15% over asking.