The Offer to Purchase and Contract Explained
North Carolina is a state with a unique structure for real estate transactions. The North Carolina Offer to Purchase and Contract, sometimes referred to as the Form 2-T, is the most widely used form for binding a buyer and seller to a contract for the sale of real property in North Carolina. Although the document has seen various revisions since its inception (the latest revisions to the form took effect on April 1, 2019), the basic structure of the document has remained largely unchanged. The document is typically executed when there is a buyer who wants to purchase a piece of real property and a seller who wants to sell that property. It is at this point when the parties agree on a price and the other material terms for the sale of the property.
North Carolina law requires all real estate contracts to be in writing , signed by the party to be charged. In fact, there are some lawyers who refuse to draft this document for their clients and will only review the document after it is signed so that it cannot be used against either party.
Because North Carolina is a caveat emptor state (Latin for "let the buyer beware"), buyers are expected to perform thorough due diligence prior to the acquisition of real property. To assist in that process, the Offer to Purchase and Contract gives the buyer the right to a fully independent due diligence investigation during which it can determine the present of past of any number of concerns, including boundaries, restrictions, title, zoning, leases, building and construction issues, environmental hazards, etc. This is one of the greatest benefits of the purchase contract.
Core Components of the Contract PDF
The form that would evolve into the Offer to Purchase and Contract PDF was initially designed as a simple, one-page document, where each party could begin to flesh out the terms and conditions necessary for a successful real estate transaction. The version that would eventually become the standard for North Carolina real estate transactions was created with the input of numerous stakeholders in the sale of property. Real estate attorneys, brokers, and lenders all weighed in on a draft that was of increasing length and detail.
Today, the North Carolina form is a lengthy outline of the numerous arrangements and agreements that can be made, and reflects the growing complexity of all real estate transactions. It breaks down the agreement into numbered sections that allow each party to quickly find precisely the provision they are looking for. In the current version, a potential buyer and seller will find significant revisions covering everything from earnest money deposits to financing and closing. The ability to easily locate essential provisions is another reason this seller-and-buyer-friendly form has gained so much traction. Even the lengthy paragraphs describing unique circumstances and conditions relating to due diligence can be broken down to a few bullet points or numbered paragraphs, to clearly identify the most important provisions each party should expect.
In Section 1.2, the buyer and seller are asked to describe the property in great detail. Though this may seem unnecessary at first, it provides the useful service of extending the responsibility of the property description outside of the typical contract language you’d find in the North Carolina form. In this section, the buyer and seller must provide the lot number of the property, as well as the city and county, the street address, the type of property (single-family residence, townhome, condominium, or some other designation), provided legal description, and the listing number, if there is one. Each of these conditions provides the parties with a precise location for the subject property, and can be useful in the future if any confusion arises.
Sections 2.1 and 2.2 have to do with the all-important purchase price. Section 2.1 deals with how the transaction will be financed: through cash, with seller assistance, or with third-party financing. Nearly all buyers will need the financing of mortgages and loans to make this perhaps the largest transaction of their lives. Section 2.2 sets the base price for the deal through the calculations of the due diligence fee and the earnest money deposit. The financial impact of these two segments of the transaction should not be undervalued. The due diligence fee is a non-refundable amount that is required by the seller before the buyer ever sees the property. If the buyer ultimately decides they no longer wish to purchase the property, this fee is forfeited to the seller. The earnest money deposit, however, is refundable if the deal does not go through. It will be held in escrow by the attorney conducting the closing.
These provisions are incredibly significant to buyers and sellers, but are relatively unimportant in the grand scheme of the transaction to the real estate broker representing the buyer or seller, or the home inspector providing an inspection. The players running the game — the real estate attorney or agent — need to ensure that they set the correct purchase price. This area is ripe for confusion, and thus the broker or attorney needs to work to confirm that the proper details for the purchase price are filled in.
Sections 3.1 through 3.9 covers all of the legalese in the contract. This includes how the buyer intends to finance the deal, contingent upon the inspection or the appraisal of the home, as well as provisions for prorated taxes, and how to handle the possibility that the buyer and seller cannot reach a deal on the property. These subsections, perhaps more than any other part of the contract PDF, will be heavily scrutinized to determine whether the transaction is likely to go through.
Using and Accessing the PDF Form
The official North Carolina Offer to Purchase and Contract PDF, referred to as the "Offer to Purchase," is a form prepared by the North Carolina Bar Association’s Real Property Section for use by real estate professionals in the state. The form can be accessed online from the section’s official website and from the North Carolina General Statutes.
In order to download the form, one must first visit the North Carolina Bar Association’s web page. From there, click on the "Practice Areas" dropdown menu, select the "Real Property Section," and then click on the "Forms" link. Alternatively, the form is also available directly through the North Carolina General Statutes website by navigating to the relevant section of the statutes that covers 2018 NC St. 2 (North Carolina Form 2-E. Offer to Purchase and Contract).
When downloading the form, it is important to select the version of the form that is appropriate for your needs. For example, make sure to download the Residential form if you are using the form to purchase a property that will be used solely as a residence. If you are purchasing a larger property which may make sense to subdivide, be aware of the difference between the Residential and the Multi-Parcel versions of the form.
Once downloaded, sections of the form can be easily filled out by clicking with your mouse at each section and typing in the information relevant to your specific transaction. Like all important legal documents, make sure to proofread your work and ensure that you have included all of the required information.
Once filled out, the form should be printed and delivered, by hand or by mail, to the seller or the seller’s agent. It is advisable to confirm receipt of the document with the recipient.
Should you need to make edits to the form after any type of submission-by mailing, emailing, or faxing-you will likely need to restart the process with a new form. In most cases, only one form can be completed and submitted until it either becomes void in accordance with the North Carolina Statutes or it becomes binding.
Common Errors to Watch For
In the fast-paced world of real estate look no further than the Offer to Purchase and Contract PDF form used in North Carolina to cause a dispute between the buyer and seller of property. When dealing with real estate there are seemingly endless possibilities for mistakes to occur. It’s important however that the parties are aware of the most common mistakes that occur so that they can be avoided. In North Carolina, it’s even more important to understand this as mistakes that occur on an Offer to Purchase and Contract can result in a deal falling through and the loss of a deposit. Below you will find the most common errors that occur on Offer to Purchase and Contract PDF forms in North Carolina and how to avoid them.
When they see there is a blank for their initials, many people think that it means whatever goes in that blank does not mean very much. This is not true. If a party initials in the spot for the due diligence period, but did not actually agree to that provision, then their initials could become the basis of a lawsuit. Always make sure you understand the provision you are signing and put your initials in the correct space. The last thing you want to see on closing day is the seller standing in the corner with a pocket full of blank forms. If the seller does not fill out the property disclosure statement or the Wire Fraud Warning, the forms may be found unenforceable. Misspellings, incomplete information, and incorrect dates turn up on Offer to Purchase and Contracts surprisingly frequently and almost always create a problem. If a contract contains mistakes, the remedy is to redraw the contract. If the entire contract is redrawn, it has to go to the bottom of the line. So, if there are several offers ahead of you, signing a new contract could mean a great offer on a home just fell through. When they sign an Offer to Purchase and Contract many buyers and sellers forget to cross out the references to the banker as a closing attorney. They then expect the bank to select a closing attorney and have the closing done by a bank’s attorney. When this happens a party faces two dangers: Fortunately, if there is a North Carolina Offer to Purchase and Contract PDF that has not been signed, the buyer can always use their attorney to negotiate and alter the contract. In North Carolina when buyers and sellers enter into a sales contract, they must make a payment for due diligence. This is a big deal, legally, and a binding contract between buyer and seller that sets a timeline which must be followed closely.
Legal Aspects and Buyer Protections
Buyers should understand the legal considerations and protections that come along with their residential real estate contract. The Attorney General has a great website that outlines the Offer to Purchase and Contract. As you can see from the site, there are numerous provisions that give buyers’ confidence that they will be protected if things go awry during the due diligence period or they have issues with the home after closing.
The forms offers a "due diligence period" for the Buyer to investigate the home and find any issues that could end up costing them significant money. During the due diligence period, the Buyer has the ability to back out of the contract for any reason (or no reason). Considering the Buyer only has a finger-hold after the due diligence period concludes, any contingency period offered to the buyers is a valuable asset for buyers. It protects against unforeseen repairs that will significantly affect the home value.
Normally , the majority of repairs are to systems that have been used for a few years. This might include the roof, hot water heater (could be tank or tank-less), HVAC (heating and air conditioning), and plumbing (toilets, sinks, drains, and water supply lines). Some Buyers are so cash flush that investigating the age of certain systems is just a perfunctory activity, but for most buyers, these repairs or even replacements could wipe all contingencies out of the contract and make it not possible for the buyer to walk away. Understanding the risks before entering the due diligence period is critical for the home inspection (if one is performed) and repairs to be made properly and on time.
The form allows flexibility for the buyer and seller to tailor when the payment for repairs will occur, prior to 5 days before closing, or at closing. The payments can be made before closing, but will require the Seller to sign a release of lien or no lien affidavit, because the repairs will need to be paid directly by the Buyer to the vendor.
Engaging with Real Estate Agents and Brokers
Working with a real estate professional ensures that all provisions of the North Carolina Offer to Purchase and Contract are fulfilled, including the buyer’s due diligence, and that the seller actually transfers the property. When working with a buyer’s agent, the buyer has someone on his or her side during the due diligence process who is charged with looking out for that buyer’s best interest. I cannot tell you how often the seller pushes back on repairs and the agent uses the same reasoning as the seller unless the buyer’s agent is there to protect him or her. In those situations you have someone on your side to fight for you.
I am also reminded why it is so important to hire an attorney when getting into contract. The Duke versus North Carolina game of contract negotiation continues. I work with in-state buyers and out of state buyers who are both sensitive to competing offers. The problem is sometimes that when you come across a unique home that you know is going to sell quickly, you act fast and enter a quick due diligence period which is a partial win for the seller.
Why is it a partial win for the seller? The reason is simple. You do not have sufficient time to negotiate a contract to fit your needs, so if there is anything wrong with the home you are likely to fight back on repairs or be left with the choice of a reduced sales price to cover the cost of some deferred maintenance. We call this the "Inspection games." You do not want to play.
We are paid a fee to handle the paperwork and make sure the contract is correct, so in a situation where the due diligence period is required to be short you can call the attorney and have him or her send over the "North Carolina Offer to Purchase and Contract PDF." Even if you have another contract, your attorney can add the extra terms you discussed. It does not hurt to ask.
The key is to follow the law and use the form as written with as little modification as necessary. The "North Carolina Offer to Purchase and Contract PDF" is set up to handle most of the situations you will encounter. Occasionally, you may need to add a special provision, but if you can, don’t put all of the "red" provisions in the contract or it will pass the point of no return.
Some attorneys are willing to write out the negotiating points but I have met very few who spend that much time on a form. Also consider that once you have gotten into contract if you have tried to get specific on points by listing them in the contract or in a factual disclosure you are bound by your words. This could be used against you later in the contract negotiation process.
Use great care, and have your attorney review the final contract before signing.
Closing Thoughts and Additional Insights
In conclusion, the Offer to Purchase and Contract PDF in North Carolina serves as a crucial tool for buying and selling residential real estate. Having a thorough understanding of its components can help you navigate the process successfully. Key takeaways include the importance of an earnest deposit, the process for due diligence and closing on the property, and the contingencies that may arise during the transaction.
Hopefully this article has given you some clarity on your options and led you to make informed decisions . Whether you’re a first-time buyer or a seasoned real estate investor, being well-versed in the Offer to Purchase and Contract PDF can ultimately save you both time and money.
For successful navigation of the Offer to Purchase and Contract in North Carolina, it’s important to follow these final tips: Read everything carefully before signing, maintain clear communication with your real estate broker, stay organized, and most importantly, trust that the closing attorney you work with will help close the loop on this purchase.