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

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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

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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.

Weekly Market Activity Report – Charlotte Area

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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

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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.

Balancing Your Wants and Needs as a Homebuyer Today

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Let Carolina Living Real Estate Help You Navigate This Market

Balancing Your Wants and Needs as a Homebuyer Today | MyKCM

Since the number of homes for sale is low today, it can feel challenging to find one that checks all your boxes. But if you know which features are absolutely essential in your next home and which ones are just nice bonuses, you can land a home that fits your needs.

Danielle Hale, Chief Economist for realtor.com, explains it like this:

“Focus on the goal you set out for yourself, like your list of must-haves and nice-to-haves and your budget, . . . Stick to that. Be persistent.”

So how do you go about creating your list of desired features? The first step is to get pre-approved for your mortgage. Pre-approval helps you better understand your budget, and that plays an important role in how you’ll craft your list. After all, you don’t want to fall in love with a home that’s too far out of reach.

Once you have a good grasp of your budget, you can begin to list all the features of a home you would like. Here’s a great way to think about them before you begin:

  • Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle (examples: distance from work or loved ones, number of bedrooms/bathrooms, etc.).
  • Nice-To-Haves – These are features that you’d love to have but can live without. Nice-To-Haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of the these, it’s a contender (examples: a second home office, garage, etc.).
  • Dream State– This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner (examples: farmhouse sink, multiple walk-in closets, etc.).

Finally, once you’ve created your list and categorized it in a way that works for you, discuss it with your real estate advisor. They’ll be able to help you refine the list further, coach you through the best way to stick to it, and find a home in your area that meets your needs.

Bottom Line

Crafting your home search checklist may seem like a small task, but it can save you time and money. It’s also one of the keys to being successful in today’s competitive market. Let’s connect so we can work together to find a home that fits your wants and needs.

How Global Uncertainty Is Impacting Mortgage Rates

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Carolina Living Real Estate Has The Experience to Help You With All Your Real Estate

How Global Uncertainty Is Impacting Mortgage Rates | MyKCM

If you’re thinking about buying or selling a home, you’ll want to keep a pulse on what’s happening with mortgage rates. Rates have been climbing in recent months, especially since January of this year. And just a few weeks ago, the 30-year fixed mortgage rate from Freddie Mac approached 4% for the first time since May of 2019. But that climb has dropped slightly over the past few weeks (see graph below):

How Global Uncertainty Is Impacting Mortgage Rates | MyKCM

The recent decline in mortgage rates is primarily due to growing uncertainty around geopolitical tensions surrounding Russia and Ukraine. But experts say it’s to be expected.

Here’s a look at how industry leaders are explaining the impact global uncertainty has on mortgage rates:

Odeta Kushi, Deputy Chief Economist at First American, says:

“While mortgage rates trended upward in 2022, one unintended side effect of global uncertainty is that it often results in downward pressure on mortgage rates.”

In another interview, Kushi adds:

“Geopolitical events play an important role in impacting the long end of the yield curve and mortgage rates. For example, in the weeks following the ‘Brexit’ vote in 2016, the U.S. Treasury bond yield declined and led to a corresponding decline in mortgage rates.”

Kushi’s insights are a reminder that, historically, economic uncertainty can impact the 10-year treasury yield – which has a long-standing relationship with mortgage rates and is often considered a leading indicator of where rates are headed. Basically, events overseas can have an impact on mortgage rates here, and that’s what we’re seeing today.

Will Mortgage Rates Stay Down?

While no one has a crystal ball to predict exactly what will happen with rates in the future, experts agree this slight decline is temporary. Sam Khater, Chief Economist at Freddie Mac, echoes Kushi’s sentiment, but adds that the decline in rates won’t last:

“Geopolitical tensions caused U.S. Treasury yields to recede this week . . . leading to a drop in mortgage rates. While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months.” 

Rates will likely fluctuate in the short-term based on what’s happening globally. But before long, experts project rates will renew their climb. If you’re in the market to buy a home, doing so before rates start to rise again may be your most affordable option.

Bottom Line

Mortgage rates are an important piece of the puzzle because they help determine how much you’ll owe on your monthly mortgage payment in your next home. Let’s connect so you have up-to-date information on rates and trusted advice on how to time your next move.