What is an NC Purchase Agreement?

A North Carolina Purchase Contract is the contract to buy and sell real property within the State of North Carolina. It is the primary tool with which real estate sales are made. It is a contract and describes the terms and conditions of the agreement between the buyer and seller of real property in North Carolina. Although it is almost always prepared by a real estate agent , it can be prepared by a lawyer or, in some cases, the buyer and seller can prepare it themselves. It is subject to negotiation between the parties and rarely is it the same for any two transactions. The standard contract form used in North Carolina is the Offer to Purchase and Contract. There are several variations of this form used by real estate companies in North Carolina.

What are the Key Terms of an NC Real Estate Purchase Agreement?

Essentially every NC real estate purchase contract will include at least the following components between the parties: the parties’ names, the property description, the sale price and earnest money amount, and the settlement date. The parties to the contract are usually the party selling the property and the party buying the property, but depending on how the transfer is structured, could also include a tenant, an heir, a creditor with a judgment, a borrower or lender, or some other person or entity.
The description of what is being conveyed to the buyer from the seller is very important. First, the parties must agree on what is being conveyed —either the land, the building/structure, any fixtures or sections of the property, or some combination of these. Second, the conveyance must generally be in writing to protect the buyer later from claims based on some fault of the seller, i.e., if there is some defect in the building that existed before the purchase, but is not visible, the buyer may later discover the problem and realize the seller should have disclosed it, but it wasn’t in writing for some reason. If buyer and seller both sign the contract "as-is" in writing, then the buyer can’t generally come back on the seller for some defect in the building.
While there could always be additional terms added on top of these essentials that could impact the purchase, the above framework is intended to be a simple enough overview to explain the most common components of any NC real estate purchase contract to the reader.

Common Contingencies Found in NC Real Estate Contracts

Most NC real estate contracts, commonly referred to as "offers to purchase," are written by a real estate agent using an industry-standard form. The standard form used by the NC Association of Realtors allows for the inclusion of various contingencies. Below is a brief description of some of the most common ones, and what they may mean to the buyer and seller.
Financing Contingency
This contingency protects a buyer whose purchase is contingent upon obtaining a particular type of financing. Particularly in today’s economic world, a seller may not want to commit to such an offer. For example, if a buyer has a credit score that is too low for an FHA loan, the buyer may want an offer that is contingent upon obtaining other financing such as conventional financing, with a closing cost assistance grant being part of the deal. If the buyer is unable to get financing within the time set forth in the contingency, then the buyer will be protected and the deal should be terminated without penalty to the buyer. Without this type of protection, the buyer could lose money if the loan application is denied, even if the buyer was unable to obtain the type of loan contemplated due to a bad appraisal, for instance.
Appraisal Contingency
If the buyer fails to get an appraisal which supports the sales price and the buyer intended to make their offer subject to such appraisal, then the buyer should be entitled to terminate without penalty. In the event the buyer obtains an appraisal which does support the sales price, the buyer will have no such right of termination unless appraisal was to be done by an appraiser of buyer’s choice, rather than at the buyer and seller’s mutual selection, which is allowed under the standard form.
Home Inspection Contingency
This is a common contingency. Under this type of contingency, the buyer is given a specified period of time (a week, two weeks, etc., depending on the market) to complete a routine inspection. If the inspection reveals problems with the house, the buyer is generally entitled to terminate, though in the alternative, the buyer may ask the seller to agree in writing to correct or otherwise repair some or all of the issues.
The home inspection contingency also allows for re-inspections to ensure that repairs have been completed. If the home inspection is negative and the buyer terminates, then the buyer should be entitled to the return of his or her earnest money deposit that was previously held by the real estate company.

Buyer and Seller Rights and Responsibilities

Recognizing that consummating a transaction is not always feasible, the NCREC has incorporated additional remedies and other rules.
Buyer’s Remedies
If closing doesn’t happen for a buyer’s reasons not excused in the contract, the buyer can sue for Specific Performance or sue for Expectancy. Specific Performance under NC law is equitable in nature and more or less demands that the seller complete the deal against its wishes. The Expectancy damages remedy (a.k.a. Consequential or Victim-of-the-Bargain damages) is a lawsuit when the buyer recovers the entire difference between the contract price and the market value of the property on the date performance was due merely by showing that the seller committed material breach. The buyer may also recover "incidental damages" related to the buyer’s due diligence efforts. The compensatory damages recoverable in an expectancy lawsuit do not include expectation (or consequential or punitive) damages.
Seller’s Remedies
If a buyer refuses to close for reasons not excused in the contract, the seller can sue for Damages (a.k.a. Expectancy or Victim-of-the-Bargain damages) or for Liquidated (or Two-Times) Damages. Expectancy damages are the same as described above. Liquidated damages are those that the parties agreed to in advance if the contract was breached. That is, the damages are two times the earnest money deposited with the firm.

How to Cancel or Amend a NC Real Estate Purchase Agreement

The first place to start when looking at how to change your Form 2-TNC/1050 (purchase contract) is the contract itself. The standard North Carolina Real Estate Commission Form 2-T NC/1050 states that changes to the contract can only be made by written agreement signed by all parties. Anything to the contrary is not a valid amendment of the contract.
As far as canceling the contract, the same cancellation rules in the form apply. Per Form 2 – T NC/1050 paragraph 1(e), the seller can terminate the contract and immediately retain the money paid as liquidated damages , unless he or she agrees in writing to another return of that money. If the buyer is in default of any contingencies or any other provision of the agreement, the buyer can be forced to pay the commission to the Seller’s agent by North Carolina statutes.
Similarly, if the buyer is in breach, seller’s option for return of earnest money in paragraph 4(k) of the contract allows the seller to either pursue specific performance or accept the earnest money as liquidated damages.

Negotiating a Real Estate Purchase Agreement in NC

Buyers and sellers often think of the home buying and selling processes as a check list. Once you’ve checked off everything, you’ll be where you need to be. But many items, like understanding the NC Real Estate Purchase Contract, are not just check boxes. They have important implications for you in your real estate transaction.
Understanding the NC Real Estate Purchase Contract is one of those things that we think is strongly aligned with actually giving most buyers and sellers a nice list of items that they might not know about but should probably find out about. Getting that straightened out at the beginning will help you tremendously as you go through the process.
One of the best parts of the purchase contract is that it’s negotiable. If you find something that you’re not comfortable with, don’t let your realtor convince you to just accept it. Answering the question, "what are you looking for in this contract?" or "tell me more about why you don’t like this clause" when first reviewing the contract can yield valuable information that you can use in your negotiations with regards to repairs, price, closing costs, etc.
We understand that talking contract negotiation with your realtor professional may feel uncomfortable, or like you’re confronting him or her. But when you start to dig into the real estate purchase contract, even the most amiable of relationships can get tense. That’s completely normal, and even better, will lead to better outcomes for you, the client.

Hiring an Attorney for Your NC Real Estate Purchase Agreement

A real estate attorney can help in so many ways, including with the NC real estate purchase contract itself. Understanding exactly what you are signing when getting into a home sale or home purchase is essential for both buyers and sellers. When should I talk to a real estate attorney? As early as possible is best, but typically we see folks talking with a real estate attorney once they have entered into the purchase contract. Again, this is when your lawyer can help you make sure you understand items like right of rescission, earnest money deposits, offers and counteroffers, inspections and more. Especially if you are a first time buyer, you need to have someone on your side who can help you navigate terms that can cost you thousands of dollars.

NC Real Estate Contracts FAQ

We’re asked about the "standard" real estate contract all the time, especially since ours, the NC Realtor Purchase Contract, was updated in early 2019. In addition to speculating about the "standard" contract we clarify the following common misperceptions:
Formality
Yes, the contract is a legally binding agreement. Just because there’s no handwritten signature doesn’t mean it’s not. The Electronic Signatures in Global and National Commerce Act (ESIGN) was passed in 2000 and makes electronic documents and signatures just as legally binding as handwritten ones. Additionally, a contract can still be enforceable even if only one party has signed. It doesn’t mean you "have" a contract but it can be held up in court.
Escrow Accounts
An escrow account is where money goes until the contract is consummated. In the case of an NC real estate purchase contract, it usually goes through the real estate firm where you’re from. Whatever firm gets the earnest money deposit (a deposit, as the term suggests, of earnestness on the part of the buyer that they will actually buy the house) also holds the funds. The escrow agent even handles the closing. If anyone involved wishes to terminate the contract before closing, the terms of the contract will state to who the money will be returned . If there’s a dispute about the money and the parties can’t agree on its distribution, the closing attorney or broker can hold the money until the dispute is resolved.
Due Diligence
Due diligence is for the benefit of the buyer rather than the seller. It’s how the buyer completely vets the house, allowing them to terminate the contract for any reason during the due diligence period and still recoup their earnest money. If there isn’t a due diligence period then if the buyer finds something they want fixed they have to negotiate with the seller.
Home Inspection
The home inspection report generated by a professional home inspector is, well, a lot. More like a miniature encyclopedia than anything else, it includes every little detail about the home, including photos of virtually every nook and cranny. Sellers are discovering that most buyers expect them to make all repairs noted by the inspector and are confused by the buyer’s insistence that the roof be replaced if it’s only found, say, 35 percent "fine" and 65 percent "mold" (example). It’s not the home inspector’s job to tell the buyer to ask for new roofs, only to let them know they’re there. The buyer is welcome to ask for the new roof, and generally, sellers will offer to replace it only when it literally won’t stop leaking and they need to get rid of it fast.