Real Advice from a Real Estate Attorney
Alan M. Solana, Attorney at law
*You should consult an attorney before you sign any contract because it is legal and binding once executed. When in doubt, seek the advice of a professional. Whether it’s a real estate agent, attorney, insurance agent or home inspector, seek advice from a professional. Be proactive. If you have questions make sure you get answers.
What’s the first thing an out-of-state buyer should know about purchasing a property in Coastal North Carolina?
The first thing they should do is get a local real estate agent to represent them. That’s where the wealth of information is: someone local that can direct them and assess their needs. An experienced agent can make recommendations and also tell you what to avoid.
Can you tell me about the North Carolina Real Estate Contract?
Understand that in North Carolina the approved Board of REALTOR’S® form is an Offer to Purchase and Contract. So when it is signed and executed by all parties it is a contract to purchase. Other locales use a two-step process, the first is an offer to purchase and the second is a formal contract. In North Carolina it’s just a single step. The form is a combined Offer to Purchase and Contract. In many other jurisdictions you make an offer and then you get representation to work out the terms of the contract. In North Carolina, once you sign it’s a contract. You don’t have further negotiation. I have many people that, once the REALTOR® prepares the contract, forward it to me for review. It’s too late once you have signed a contract. If you have any questions regarding the completeness of the document you need to address it before you sign it and seek representation if necessary.
What are some common pitfalls experienced by buyers from out of area?
In some of the coastal communities in particular you want to make sure that you are buying a house in an area where you can obtain hazard and/or flood insurance. Also inquire to make sure that you can rebuild the dwelling if it is damaged. Depending on the extent of damage, you may have to meet current building codes and setback requirements. There are a lot of instances if the dwelling is damage more than 50%, you may not be able to re-build.
What are some things to know before buying a property in Coastal North Carolina?
You want to make sure that you get your home inspected by a licensed home inspector and also have a pest inspection performed. North Carolina is a moist, warm climate. It’s conducive to termites and moisture related problems.
Are there any regulations specific to people buying a second, or vacation, home?
When you finance a second home or vacation home you should discuss your intentions with your lender. If you desire to rent your home seasonally, it may dictate how you finance your acquisition.
Can you give me a primer on buying a foreclosure?
I do a tremendous amount of foreclosure work and one of the most important things to know is the difference between buying at a foreclosure sale and buying a property that has already been foreclosed and taken back by the lender.
At a foreclosure sale you buy it “as is” without warranty. The bank doesn’t own it so you can’t gain physical access to the house. You can’t inspect the property and an appraiser cannot enter the property. You have a very short time frame to pay the balance of the purchase price after the foreclosure sale. If there are occupants you don’t necessarily know the condition of the property until vacant. You may even have to evict the occupants or honor a prior lease.
When you bid at a foreclosure sale it’s not contingent on obtaining financing. Usually the purchase must be closed within 30 days. Even if you are the successful bidder you can’t get the keys until you pay the purchase price. A lot of people who are speculating are sophisticated and have lines of credit and pay cash at the sale and then refinance the property later once they make repairs and/or improvements. Also there are title issues with a foreclosure sale. There are no warranties of title so you have to know the status of title before you bid or you could end up with something that has prior liens, outstanding taxes and assessments.
With regard to properties owned by banks, many times these properties sell for less than they did at the foreclosure sale. In addition, you can make inspections and negotiate repairs if it’s owned real estate (ORE). Typically it’s vacant so you know the condition that will be delivered at closing.
The good thing about buying a house already foreclosed is that you can inspect it, negotiate repairs, make it contingent on financing and the property should be vacant. Those are all plusses. And many times the property goes for less after the bank gets it because the people who are dealing with that section of the bank, their job is to liquidate inventory.
What are some things sellers should know before listing their Coastal North Carolina property?
There have been some recent changes that require real estate agents to make inquiries about the condition of the property as well as your finances. You will have to execute a Residential Property Disclosure form. They will also inquire about the outstanding balance of your loan(s) or the existence of judgments or other liens against the property to determine if you are solvent and not trying to sell the property for less than you owe. It’s up to the listing broker to make these inquiries. You have to disclose a short sale. Buyers are spending money when they enter into a contract for inspections and applying for a loan. So if you are a seller listing property for sale, be prepared to answer questions about your finances and the physical condition of the property.
Even if you are one of these people that have the ability to pay the difference on an upside-down property, they may want to make an inquiry to make sure you can pay it. They may want some evidence that you have the ability to cover the upside-down amount.
Don’t feel like you are being picked on by the REALTOR® . That’s part of the process now, to let buyers know the risks. They need to know if they are entering a short sale transaction because it’s not for everybody. It’s particularly not for anyone who needs to buy a home in a hurry.
What sort of problems do sellers encounter and how can they prepare for them?
A seller should consider getting the home inspected before they list it to identify problems that can be remedied before it is placed on the market. Problems only invite protracted negotiations. If you find problems you start thinking, what else is wrong? Whereas, a clean inspection will place the buyer at ease. Another thing you may want to consider is obtaining a home warranty. The seller may purchase a warranty pre-sale that may be transferred to the buyer at closing or renewed or extended after purchase. A lot of people want a warranty when buying a pre-owned house and it can be a good sales technique to offer the buyer a warranty at the seller’s expense.