Due Diligence Process and Considerations

After a contract is formed between the Buyer and Seller agreeing on the terms of the purchase.
The Buyer begins taking a deeper look into the property to ensure it meets all the desired
criteria they expected based on their experience at the showing. Part of this look includes
inspections by vendors to ensure the structure, systems and safety of the home are in good
condition and maintained. This also requires a deeper look into the buyers’ ability to finance or
provide funds to complete the purchase.

Once these deeper looks are completed, the buyer may come back to the seller to request that
shortfalls in the expectation that the structure, systems and safety features are in a well
maintained and good condition are brought up to that standard. This request is exactly that, it
is a request. The contract formed outlining the terms of the purchase states:

4.(d)Repair/Improvement Negotiations/Agreement: Buyer acknowledges and understands the following:
• Unless the parties agree otherwise, THE PROPERTY IS BEING SOLD IN ITS CURRENT CONDITION.
• Seller may, but is not required to, engage in negotiations for repairs/improvements to the Property.

If the buyer does submit a request for repairs or concession, the seller may at their discretion:
A. Decline to make repairs/allow a concession,
B. Agree to some but not all request or,
C. Accept the request and move forward.

The seller has the right to have their own inspections of the concerns brought forward for the
purpose of confirming the buyer’s professional vendor’s findings. This may require an extension
of the due diligence period.

If either option A. or B. are exercised, there is a risk that the buyer may terminate the contract.
The seller has leverage in the amount of the due diligence fee that would be liquidated
damages in the case of a terminated contract. Typically, if the amount of the request is less
than the amount of due diligence fee, the buyer may decide not to request repairs and move
on. However, if the repairs exceed the amount of the fee by a significant amount, it may be in
the buyers interest to terminate and avoid expensive repairs that they may not be able to afford
in their purchasing budget, even though they would be walking away from the fee.

If the buyer does decide to terminate. The seller is free to go back on the market and updating
the Residential Property Disclosure to disclose any material defects found by a licensed
professional unless that issue has been corrected, or to revise their statement to No
Representation. Regardless of the option the seller chooses above, by law, Real Estate Agents
in North Carolina are required to disclose all material defects to buyers even when the seller
has given an express direction to withhold such information. NCGS.§ 47E-8. Agent's duty.

The seller must also weigh the effect of questions that will arise for future potential buyers as to
why the sale did not survive the inspection process. This is what we refer to as a “shadow on
the property”. The ability to answer and over come this shadow is possible by confronting it
head on in the listing information. However, experience shows that subsequent sales struggle
to meet the original offer price and subsequent offers may fall below the amount of the original
offer minus the repair/concession request.

The decision to accept or reject a buyers repair request is a, if not the most, critical milestone
in the transaction process and should be carefully thought through and discussed with your
REALTOR® to achieve the best outcome.