Must I return a Due Diligence Fee check to the buyer if they demand it?

Important information from NC Realtor Association and Carolina Living Real Estate

QUESTION: I won’t give you all the gory details, but suffice it to say there is a dispute between my buyer client and the seller about whether there is a binding contract on the property between the seller and my client. The seller thinks a contract has been created while my buyer does not. I am holding the buyer’s check for the Due Diligence Fee and was prepared to deliver it to the listing agent when the dispute arose. Now the buyer is demanding that I return the DDF check to her. What am I supposed to do? I know that if there’s a binding contract, the buyer owes the DDF to the seller. Do I hold the DDF in case there is a contract, or do I follow my buyer’s instructions and deliver the check back to her since there’s a dispute about whether a contract has been formed?

ANSWER: Whether or not there is a binding contract, an agent who is holding a Due Diligence Fee check is required by Real Estate Commission Rule 58A.0116 to return it to the buyer upon the buyer’s request. The Rule may be accessed by clicking here. Subsection (b)(4) provides that a broker may accept custody of a check or other negotiable instrument made payable to the seller for a due diligence fee, but only for the purpose of delivering the instrument to the seller.  However, the next sentence of the Rule provides that “[w]hile the instrument is in the custody of the broker, the broker shall, according to the instructions of the buyer, either deliver it to the [seller] or return it to the buyer.”  Since the buyer has instructed you to deliver the DDF check back to her, that’s what you must do to be in compliance with the Rule.

It should be noted that this Rule also requires a listing agent to return a Due Diligence Fee check to the buyer upon the buyer’s demand if the check is in the listing agent’s possession at the time of the demand. For that reason, any DDF check received by a listing agent should be delivered to the seller without delay.

If a binding contract has been formed between the seller and your client, you are correct that the buyer would owe the DDF. If the buyer doesn’t pay it, the seller likely would have the right to go after the buyer for the DDF and any Earnest Money Deposit that may have been payable, and may be entitled to recover attorneys’ fees to boot. See paragraphs 1(d) and 23 of form 2-T. However, the fact that a seller may be entitled to payment of the DDF according to the contract doesn’t affect the duty an agent holding the DDF check owes to the buyer per the Real Estate Commission’s Rule.

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Home Sales Tips: How to Market the Community Around Your Home to Prospective Buyers

Selling a home is more than real estate listings and making the home appealing to potential buyers. One factor to take into account when buying a home is its location, meaning the community that surrounds the home.  

For sellers as well as buyers, it’s important to highlight the benefits of living in a particular community.  After all, neighborhoods will have an enormous impact on the future buyer’s living experience.

It’s All About Walkable Neighborhoods

According to a Portland, Oregon-based company, City Observatory, there’s a growing demand for homes located in walkable neighborhoods. A Decades-long love affair with commuting from suburban areas, to work in the city has greatly lost its appeal.

Also, the growing demand for walkable neighborhoods is fueled by people desiring convenient access good schools as well as to entertainment options like movies, restaurants, and shopping. There’s also an appeal for easy access through reliable public transportation.

Fifty-five percent of participants said they would gladly get a small house with a small yard if it meant easy access to stores, schools, and restaurants. Plus, a walkable neighborhood also significantly increases property values. So play up the nearby community benefits that would entice potential buyers.

Great Neighborhood Amenities

Other favorable community amenities include bicycle paths, libraries and parks. These are great bonuses for neighborhoods to attract fitness-minded individuals and promote a family-friendly atmosphere for buyers with kids. Speaking of kids, living in an excellent school district usually yields higher home values.

According to a survey conducted by the Demand Institute, almost half of participants wanted a pet-friendly neighborhood. In fact, this factor ranked higher than easy access to public transportation and even public schooling.  

Neighborhood Safety

Safety is a top concern for most homebuyers. Although, there’s little one can do to quell neighborhood violence there are things an owner can do to make their home safer. They may want to consider studying security features on homes in their neighborhoods and adopt what they can, within reason.

What Potential Home Buyers Don’t Want In A Neighborhood

According to the National Association of Home Builders (NAHB), fewer home buyers were least impressed with communities with golf courses, a high population, gated communities, and mixed-use communities.

Homeowners, when listing a home, seek the help of a Carolina Living real estate agent experienced in listing the best features of both the home and the community surrounding it.

New Listing – Denver NC

PROPOSED. TO BE BUILT. NEW CONSTRUCTION $756,750. This fabulous lot is co-Marketed w/ Caruso Homes & can be purchased separately. Buyer may also work with Caruso Homes to build another of their well-designed, ready-to-build floor plans, or they may choose a builder of their own. Buyer may select their own options, upgrades, and/or elevations ensuring that every detail is crafted to perfection. Buyer may choose any of Caruso’s models that will fit on the lot. Photos and tours may display optional features and upgrades that are not included in the price. Pictures are of proposed models and do not reflect the final appearance of the house and yard settings. All prices are subject to change without notice. Final pricing, square footage, features, options and lot estimates will vary per buyer selections. Contact Sheryl Love at (240) 927-2951 or slove@carusohomes.com for more info about building w/ Caruso Homes. see sign on Wingate hill rd. Turn down road at sign and lot is on the right.

Caruso Homes: Caruso Homes | New Homes in Maryland, North Carolina, Pennsylvania, and Delaware

Weekly Market Activity Report – Charlotte Area

For Week Ending November 19, 2022 (Data current as of Nov. 28, 2022)

Weekly market activity data and reports are provided by ShowingTime, and updated on Mondays by 2:00 pm, once received. Exceptions are on Monday holidays, when data/reports are not available until the following day.

Housing supply continues to grow nationwide, as higher borrowing costs cause home sales to slow. According to Realtor.com’s Monthly Housing Market Trends Report, the national inventory of active listings increased 33.5% year-over-year in October, the highest inventory level since 2020. As a result, local buyers may find they have more options to choose from, and with homes spending more days on market compared to the same period last year, a bit more time to shop around as well.

Charlotte Region

In the Charlotte region, for the week ending November 19:

  • New Listings decreased 34.5% to 759
  • Pending Sales decreased 34.2% to 747
  • Inventory increased 49.7% to 7,784

For the month of October:

  • Median Sales Price increased 13.4% to $380,000
  • List to Close increased 16.7% to 84
  • Percent of Original List Price Received decreased 4.0% to 96.5%
  • Months Supply of Homes for Sale increased 72.7% to 1.9

More Americans Choose Real Estate as the Best Investment Than Ever Before

Real Estate Info From Carolina Living Real Estate and Property Management

Charlotte|Winston Salem| More Americans Choose Real Estate as the Best Investment Than Ever Before | MyKCM

Americans’ opinion on the value of real estate as an investment is climbing. That’s according to an annual survey from Gallup. Not only is real estate viewed as the best investment for the ninth year in a row, but more Americans selected it than ever before.

The graph below shows the results of the survey since Gallup began asking the question in 2011. As the trend lines indicate, real estate has been gaining ground as the clear favorite for almost a decade now:

More Americans Choose Real Estate as the Best Investment Than Ever Before | MyKCM

If you’re thinking about purchasing a home, let this poll reassure you. Even when inflation is high like today, Americans recognize owning a home is a powerful financial decision.

How an Investment in Real Estate Can Benefit You During High Inflation

Because inflation reached its highest level in 40 years recently, it’s more important than ever to understand the financial benefits of homeownership. Rising inflation means prices are increasing across the board, and that includes goods, services, housing costs, and more. When you purchase your home, you lock in your monthly housing payments, effectively shielding yourself from increases on one of your biggest budgetary items each month.

If you’re a renter, you don’t have that same benefit, and you aren’t protected from these increases, especially as rents rise. As Danielle Hale, Chief Economist at realtor.com, notes:

“Rising rents, which continue to climb at double-digit pace . . . and the prospect of locking in a monthly housing cost in a market with widespread inflation are motivating today’s first-time homebuyers.”

When Inflation Has Risen in the Past, Home Prices Have Too

Your house is also an asset that typically increases in value over time, even during inflation. That‘s because as prices rise, the value of your home does too. Mark Cussen, Financial Writer for Investopedia, puts it like this:

“There are many advantages to investing in real estate. . . . It often acts as a good inflation hedge since there will always be a demand for homes, regardless of the economic climate, and because as inflation rises, so do property values. . . .”

And since rising home values help increase your equity, and by extension your net worth, homeownership is historically a good hedge against inflation.

Bottom Line

Buying a home is a powerful decision. It’s no wonder why so many people view it as the best long-term investment, even when inflation is high. When you buy, you help shield yourself from increases in your housing costs and you own an asset that typically gains value with time. If you want to better understand how buying a home could be a great investment for you, let’s connect today.

Charlotte|Winston Salem|Lake Norman Myths About Today’s Housing Market

Myths About Today’s Housing Market [INFOGRAPHIC] | MyKCM

Some Highlights

  • If you’re planning to buy or sell a home today, it’s important to be aware of common misconceptions.
  • Whether it’s timing your purchase as a buyer based on home prices and mortgage rates or knowing what to upgrade or repair before listing your house as a seller, it takes a professional to guide you through those decisions.
  • Let’s connect so you have an expert to help separate fact from fiction in today’s housing market.