As we enter the spring market the question when i get an
offer on one of my listings is the time period for the due diligence period.
What is an acceptable timeline? In the past it did not matter as much as most
sellers were excited to have an offer on their house. But as the market has
shifted to a more balanced approach and showings are up as well as multiple
offers; there is becoming a new normal as to what is acceptable for due
diligence time and money.
Last year I noticed that offers were written with the due diligence period in the Charlotte, NC. area running up to a day or two before closing to maybe a week before closing. But never more than a week before closing. In addition that was with acceptable terms on the closing date being in 30 to 45 days. Now, sellers are asking for that period to be shortened dramatically or they are asking the buyers to put up more money to extend the time.
The due diligence period was a time when the seller takes the house off the market so that the buyer can perform their inspections, get the house appraised, and finalize the loan process paperwork. Generally two to three weeks was the timeline to assure that you would not have any issue with closing. If it went beyond that point and the buyer did not terminate the contract; then the seller was entitled to the earnest money in addition to the due diligence fee. Most buyers would offer $100.00 to $200.00 for this convenience and the sellers would accept.
Now, i am noticing that sellers are asking for half or most of the earnest money in due diligence fee and the time lien to be shortened.... They argument I hear is that it is a sellersâ€™ market. Well in my professional opinion it is all subject. If I am in a multiple offer situation then putting in more due diligence money and a shorter time will make my offer more attractive to the seller if all of the other terms are equal. but if the house has been on the market for an extended period of time; then putting less money down should be expected (as long as the time line is reasonable).
I have been in both sides of this dilemma this year and do not know if there is a concrete answer. What I have concluded form transactions that have closed and not closed is that the seller that asks for more money upfront and a significant shorter timeline are harder to negotiate with on repairs and closing and extensions....generally the buyers are getting frustrated and I have had a couple walk away from deals and lose due diligence money.
I have been working on the premise of a couple hundred dollars for due diligence fee and a two to three week window period with a 30 to 45 day close.....I like to think that I can get all the necessary inspections and repairs negotiated out in that time line and have the appraisal back and all the preliminary underwriting done. If not; then i am not doing the buyer or the seller any justice or my job.
There are going to be people that disagree with my thinking. But as a Realtor working both sides of the transactions as a listing Â agent and a buyer's agent....when o get an offer with those time liens in it I feel it is fair and I present my offer with those timelines in it. Ironically, all deals I have negotiated and closed or closing never have asked for any adjustment in the due diligence fee or time period.
Coldwell Banker United