Asheville attracts people from all over the country because of its incredible mountain views, endless outdoor activities, moderate temperatures, dynamic food scene, and historic landmarks. Although the market is shifting in other areas of the United States, Asheville continues to experience a strong seller’s market. The average days that a home is on the market before going under contract is around 30 days, and seller’s are selling their homes for 98% of their asking price on average. Although the competition is fierce, nearly a quarter of contracts fall through before closing due to financing issues, surprises during the home inspection, or just cold feet. Negotiating back-up contract is a wise strategy that buyers can use to combat this competitive market.
What is a back-up contract in North Carolina?
Real estate offers are written on a standard form 2-T (for homes) or a 12-T (for vacant land) in the state of North Carolina. These contracts includes all terms of the contract–location and information about the property, purchase price, due diligence period, settlement date, etc. If a piece of property is already under contract with the seller and Buyer A, Buyer B can request to submit a back-up offer. In that event, an additional document, called Back-up Contract Addendum (form 2A1-T), is attached to Buyer B’s offer and must be signed by both parties to go into effect.
The contract between the Seller and Buyer A is called the “primary contract”, and the contract between the Seller and Buyer B is called the “back-up contract”. In the state of North Carolina, a buyer can backout of the contract for any reason during the Due Diligence Period (although they would forfeit the Due Diligence Fee, which is non-refundable and due immediately after the contract is signed by both parties). If Buyer A backs out during the Due Diligence Period, Buyer B’s contract would automatically become the “primary contract” and would be immediately notified in writing by the Seller.
What are the benefits of a back-up offer?
- Monies owed: The North Carolina Back-up Contract Addendum does not require a back-up buyer (Buyer B) to submit their Due Diligence fee to the seller until the contract moves to the primary position. The addendum does require the back-up buyer’s Earnest Deposit to be held in escrow. However, it is fully refundable until Buyer B’s Due Diligence Period expires after their back-up contract moves to the primary position.
- Leverage: A back-up offer provides greater leverage in a real estate transaction. Sellers may encourage a back-up contract in order to discourage primary contract buyers from making any unreasonable requests during the Due Diligence Period.
- Flexibility: The back-up contract buyer (Buyer B) can continue to shop around for other homes while they’re in the back-up position. If they decide that another home suits them better, they can cancel their back-up contract and receive a full refund of the Earnest Deposit.
- Assurance: In the state of North Carolina, a back-up contract is a fully-executed offer. This means that the buyer and seller are both legally bound to the contract. A seller would be in breach of the contract if they were to back out of the primary or back-up contracts. A back-up contract buyer (Buyer B) can rest assured that they would be the next in line to purchase the home if the primary contract buyer (Buyer A) were to back out of their contract.
Want to know more about back-up offers?
An experienced local Realtor from Asheville’s Dream Team will help you understand the Back-up Contract Addendum and answer any other real estate questions you may have. Give us a call at (828) 771-2329, and we’d love to connect with you!
Katie @ Asheville’s Dream Team