Buying a house? How to navigate the home inspection process in NC and due diligence period
With peak home-buying season on the horizon as spring arrives, there’s an important part of the home buying process experts say you shouldn’t skimp on.
Even in a competitive real estate market when buyers are more prone to being extra flexible in their offers, home inspections are vital, Barry Reeves, “the Real Estate Geek” with Keller Williams SouthPark, noted.
“If you’re purchasing a house that’s 50 years old or brand new, you still want to go in with your eyes open,” he said.
Here’s what to know about how the home inspection process works in North Carolina.
How do home inspections work?
During a home inspection, an inspector will look “at every nook and cranny” of a home about to be purchased to catch any and all issues.
“It protects the buyer, protects the seller and everybody is on the same page of what they’re buying,” Reeves said.
Even if the home for sale is newly built, Reeves added, an inspector provides a “fresh set of eyes.”
Once there’s an inspection report, the buyer and seller can negotiate who is going to take care of any issues flagged.
“When you’re negotiating repairs,” Reeves said, the biggest things sellers are typically responsible for are “anything that’s a safety issue, a structural issue, or a systems issue.”
“Generally the seller is going to have to make those repairs to sell the house to anyone, so if something is caught in an inspection, generally most sellers are going to make those repairs,” he said.
Conversely, “something very cosmetic” such as a paint job will likely be the buyer’s responsibility.
“And then there’s stuff in those gray areas, usually windows, that we tend to debate and negotiate back and forth,” Reeves added.
What does it mean to buy a home “as is?”
During the white hot real estate market in 2022, there were stories of prospective buyers offering to waive a home inspection as a way to sweeten their offer on a home.
But, Reeves said, the concept of “waiving a home inspection” can be “sort of a misnomer.”
“I’m not sure they’re waiving an inspection so much as they’re waiving the right to ask for repairs, which are two totally different things,” he said. “You can buy a house ‘as is,’ and I’ve done many transactions where the buyer did that, but the buyer still should do a home inspection because you still want to know what you’re getting into.”
And just because you agree to buy a home “as is” doesn’t mean you’re waiving your right to walk away from your purchase, he added.
“You’re not giving up that right,” Reeves said. “You’re just giving up the right to ask for a window to be replaced, or insulation to be replaced in the crawlspace, or things like that.”
How do due diligence fees and earnest money deposits work?
Another part of the home-buying process closely tied to home inspections is your non-refundable due diligence fee.
This money is paid by a buyer ahead of the due diligence period — usually about three weeks during which the home being sold is inspected and appraised and any ensuing negotiations happen — to help prevent deals from falling apart.
“The more money that is involved in the due diligence fee, the more likely you are to close,” Reeves said. “The more likely you are not to walk away over something minor in the inspection report.”
How much you pay in due diligence fees is negotiable, he added, and can help you strengthen an offer.
“In the hot COVID times, some of those numbers got crazy nutso,” he said. “Now they’re back down to a little bit more normal: in a 1% range of the purchase price. Or, if you’re in a competitive situation, you may go up more.”
Earnest money deposits are also paid by a buyer as a sign of their commitment but are “protected to a certain point in the inspection process,” Reeves explained.
In North Carolina, you can get that deposit back up until 5 p.m. “on the date the due diligence period ends.”
If you make it to closing, your due diligence fee and earnest money deposit “become part of your down payment.”
What’s different during estate sales or for investment properties?
If you’re buying a property through an estate sale or an investment property, the disclosure process may be different, Reeves said. That’s because the seller may not have all the details a homeowner selling their primary residence would know, including how old certain systems or features are.
“So the buyer goes into the (inspection) process a little bit more blind than they would be,” he said.
Having a knowledgeable real estate agent can be beneficial in this situation, Reeves said.
“A good, smart agent who’s been around the game a long time is going to be able to look at any piece of equipment or any roof” and estimate how old it is, he said. “A good agent is gonna at least get you a ballpark before you write that contract, before you put that due diligence fee and/or your earnest money at stake.”
