Your Guide to Purchasing a Home in North Carolina: Steps, Terms, and Key Details
Buying a home in North Carolina is an exciting journey, but it comes with a unique process that differs from other states, particularly due to the "due diligence" system. Whether you're a first-time homebuyer or relocating to the Tar Heel State, this guide will walk you through the steps to purchase a home, define essential terms, and clarify who pays for what, how funds are handled, and why certain decisions, like the closing date, might shift. We’ve included links to the North Carolina Realtors and the North Carolina Real Estate Commission (NCREC) for definitions and additional information. Let’s dive in!
Key Terms to Understand
Before we explore the steps, let’s define the critical terms involved in a North Carolina home purchase, with resources for further reading:
Purchase Price: The agreed-upon amount the buyer will pay for the property, as specified in the purchase contract. It’s the cornerstone of the transaction and influences other costs like earnest money and due diligence fees. Learn more about contract terms from the North Carolina Realtors Forms Library.
Due Diligence Fee: A non-refundable payment made by the buyer directly to the seller when the offer is accepted. It compensates the seller for taking the property off the market during the due diligence period. Typically, it ranges from $500 to $2,000, but in competitive markets, it can be higher (e.g., $10,000 for a $369,000 home in Charlotte). This fee is credited toward the purchase price at closing but is retained by the seller if the buyer backs out during the due diligence period, unless the seller breaches the contract. For details, see the NCREC’s Guide to Working with Real Estate Agents.
Due Diligence Period: A negotiated timeframe (usually 2–4 weeks) during which the buyer can investigate the property through inspections, appraisals, title searches, and other assessments at their own expense. The buyer can terminate the contract for any reason before the period ends (by 5:00 p.m. on the due diligence date) and recover their earnest money, but they will lose the due diligence fee. After this period, backing out risks both the due diligence fee and earnest money. Learn more in the North Carolina Realtors’ FAQs.
Earnest Money: A deposit paid by the buyer to demonstrate good faith and commitment to the purchase. Typically 1–2% of the purchase price, it’s held in an escrow account and credited toward the purchase price at closing. It’s refundable if the buyer terminates the contract during the due diligence period but is forfeited if they back out afterward, unless the seller breaches the contract. See the NCREC’s License Law and Rules for regulations on escrow accounts.
Trust Account: A non-interest-bearing escrow account where earnest money is held until closing. In North Carolina, this is typically managed by a licensed attorney, real estate brokerage, or, in some cases, the closing attorney (e.g., at firms like Jordan & Warshauer Real Estate, JWRE, the closing attorney holds the earnest money). These accounts ensure funds are secure and only released per the contract terms. For more on trust accounts, refer to the NCREC’s Rules on Trust Accounts.
Closing Attorney: A licensed attorney who oversees the closing process, including title searches, deed preparation, and fund disbursement. In North Carolina, closings are conducted by attorneys, not title companies, ensuring legal oversight. Learn about the closing process from the North Carolina Realtors’ Legal Resources.
Standard Forms: The primary form used by North Carolina Realtors is the Offer to Purchase and Contract (Form 2-T), created by the North Carolina Association of Realtors and the North Carolina State Bar Association. This form outlines the terms of the sale, including due diligence, earnest money, and contingencies. Other forms, like Form 350-T (Termination of Contract), may be used for specific circumstances. Access these forms via the North Carolina Realtors Forms Library.
Steps to Purchase a Home in North Carolina
1. Get Pre-Approved for a Mortgage
Before house hunting, consult a lender to get pre-approved for a mortgage. This step determines your budget, strengthens your offer, and signals to sellers that you’re a serious buyer. You’ll need to provide financial documents like income statements, tax returns, and credit history. Pre-approval also helps you understand closing costs, which typically range from 2–5% of the purchase price. For financing tips, visit the North Carolina Realtors’ Homebuyer Resources.
Who Pays: The buyer covers lender fees, such as application or appraisal fees, unless negotiated otherwise.
2. Work with a Realtor
Hire a licensed real estate agent, ideally a Realtor who adheres to the National Association of Realtors’ code of ethics. A buyer’s agent will guide you through the process, help craft competitive offers, and negotiate on your behalf. They can also recommend trusted professionals, like home inspectors or closing attorneys. Learn about working with agents in the NCREC’s Working with Real Estate Agents Brochure.
Who Pays: The seller typically pays the commission for both the buyer’s and seller’s agents, funded from the sale proceeds at closing, though new rules effective August 2024 require buyer-broker agreements to clarify compensation upfront.
3. Find and Tour Homes
With your Realtor, identify homes that fit your needs and budget. Tour properties to assess their condition, location, and suitability. In North Carolina’s competitive markets, like Charlotte or Raleigh, be prepared to act quickly. For market insights, check the North Carolina Realtors’ Market Data.
Who Pays: No direct costs at this stage, though buyers may incur travel or time-related expenses.
4. Make an Offer
When you find the right home, your Realtor will draft an Offer to Purchase and Contract (Form 2-T). This document includes:
The purchase price.
The due diligence fee and period (e.g., $1,500 for 21 days).
The earnest money amount (e.g., 1% of the purchase price).
The proposed closing date (typically 30–60 days from the contract’s effective date).
Any contingencies or special conditions.
The due diligence fee is paid directly to the seller upon offer acceptance, and the earnest money is deposited into a trust account (e.g., with the closing attorney) within days of signing the contract. For a sample Form 2-T, see the North Carolina Realtors Forms Library.
Who Pays: The buyer pays the due diligence fee and earnest money. The seller may counter the offer, negotiating terms like the purchase price or due diligence period.
5. Due Diligence Period
Once the offer is accepted, the due diligence period begins. During this time, you’ll:
Conduct Inspections: Hire licensed inspectors for structural, pest, septic, or other assessments. Inspections cost $350–$1,000, depending on the property and ala carte inspection add ons choosen by buyer. See the NCREC’s Home Inspection Brochure for guidance.
Order an Appraisal: If financing, your lender will require an appraisal to confirm the home’s value matches the purchase price (cost: $300–$900 depending on sf ).
Perform Title Searches: The closing attorney checks for liens or title issues.
Secure Insurance: Obtain homeowner’s insurance quotes.
Review HOA Documents: If applicable, assess covenants and fees. Make sure that the HOA docs support the use you need such as big trucks parked at the curb, running a home based business, noise, outdoor furniture and landscaping, road maintenance, exterior maintenance, home modification and any other particular you need in a home.
Negotiate Repairs: If inspections reveal issues, you can request repairs, a price reduction, or concessions. The seller isn’t obligated to agree, but negotiations are common.
You can terminate the contract for any reason before the due diligence deadline, recovering your earnest money but losing the due diligence fee. If you need more time, negotiate an extension with the seller before the deadline, as missing it risks both deposits. For termination details, see Form 350-T in the North Carolina Realtors Forms Library.
Who Pays: The buyer pays for inspections, appraisals, and other due diligence activities. The seller may cover repairs if negotiated.
6. Finalize Financing
Work with your lender to finalize your mortgage. Provide any additional documentation, and ensure the appraisal meets the lender’s requirements. If financing falls through during the due diligence period, you can exit the contract and recover your earnest money. For financing resources, visit the North Carolina Realtors’ Homebuyer Resources.
Who Pays: The buyer covers financing-related costs, like loan origination fees.
7. Choose a Closing Attorney
The buyer typically selects the closing attorney, who handles:
Title searches and insurance.
Preparation of closing documents.
Escrow of earnest money (e.g., at JWRE, the closing attorney holds these funds).
The settlement conference, where documents are signed, and funds are disbursed.
If the seller prefers a different closing attorney, this is acceptable but will involve a bit more paperwork shuffeling. This situation is rare, as the buyer’s attorney is usually accepted to streamline the process. If unresolved, the contract could fall apart, but Realtors often mediate to find a mutually acceptable attorney. Learn more about closings from the North Carolina Realtors’ Legal Resources.
Who Pays: The buyer typically pays the closing attorney’s fees, though this can be negotiated. Sellers may pay for deed preparation.
8. Attend the Settlement Conference
The closing, or settlement conference, is held at the closing attorney’s office (typically 30–60 days from the contract’s effective date). You’ll:
Sign documents, including the deed and mortgage agreements.
Pay the down payment and closing costs.
Receive keys once funds are verified.
The closing attorney ensures prorated items (e.g., taxes, HOA dues) are calculated and disburses funds, including the earnest money and due diligence fee, credited toward the purchase price. For closing details, see the NCREC’s Real Estate Closing Brochure.
Who Pays: The buyer pays closing costs (e.g., lender fees, title insurance) and the down payment. The seller pays transfer taxes and any outstanding liens.
9. Record the Deed
The closing attorney records the new deed at the county Register of Deeds, finalizing the transfer of ownership. You’re now a homeowner!
Who Pays: The buyer typically covers recording fees.
Why and How the Closing Date Might Change
The closing date, set in the Offer to Purchase and Contract, is negotiable and typically occurs 30–60 days after the contract’s effective date. However, it can change due to:
Delays in Financing: If the lender needs more time for underwriting or appraisal, the closing may be postponed. Both parties must agree to an extension via a contract addendum.
Inspection or Repair Delays: If inspections uncover significant issues and repairs are negotiated, additional time may be needed to complete them.
Title Issues: Liens or title disputes discovered during the search may delay closing until resolved.
**BuyerEvaluation of the closing date change reasons completed successfully.
Buyer or Seller Circumstances: Personal or logistical issues (e.g., a seller’s delayed move-out) can prompt a mutual agreement to adjust the date.
Due Diligence Extension: If the buyer needs more time for inspections, they may negotiate an extension, which could push the closing date.
To change the closing date, both parties sign an addendum to the contract, facilitated by their Realtors. Clear communication and flexibility are key to avoiding disputes. If one party refuses to agree, the contract could be breached, potentially leading to the loss of deposits or legal action, though this is rare. For addendum forms, visit the North Carolina Realtors Forms Library.
Who Typically Pays for What: A Summary
Buyer:
Due diligence fee (non-refundable, credited at closing).
Earnest money (refundable during due diligence, credited at closing).
Inspections, appraisals, and title searches.
Closing costs (e.g., lender fees, title insurance, attorney fees).
Down payment and recording fees.
Seller:
Real estate agent commissions.
Transfer taxes and deed preparation.
Repairs or concessions (if negotiated).
Prorated taxes or HOA dues.
Tips for a Smooth Home Purchase
Work with Professionals: A knowledgeable Realtor and closing attorney are invaluable for navigating North Carolina’s due diligence process.
Budget Wisely: Account for upfront costs like the due diligence fee, earnest money, and inspections, especially in competitive markets.
Track Deadlines: Mark the due diligence deadline in your calendar to avoid losing your earnest money.
Communicate Clearly: Discuss the closing attorney selection and potential date changes with your Realtor to ensure alignment with the seller.
Conclusion
Purchasing a home in North Carolina involves careful planning, from securing financing to navigating the due diligence period and closing. By understanding terms like due diligence fees, earnest money, and the role of the closing attorney, you’ll be better equipped to make informed decisions. The Offer to Purchase and Contract (Form 2-T) provides a structured framework, but flexibility and communication are essential, especially if the closing date needs adjustment. Partner with a trusted Realtor and closing attorney to ensure a seamless experience, and soon, you’ll be calling North Carolina home!
For more information, explore resources from the North Carolina Real Estate Commission or contact a local Realtor via the North Carolina Realtors’ Local Board Directory. Happy homebuying!
Disclaimer: This blog post is for informational purposes only and does not constitute legal or financial advice. Consult a licensed real estate professional and attorney for guidance specific to your situation.
