How Does an Offer Become a Contract?

So, you found your dream house! Congratulations! Now comes the not-so-dreamy part: navigating the world of offers and contracts. Fear not! This blog will break down the key steps of transforming your initial offer into a binding real estate contract in North Carolina.

Understanding the Contract

The real estate contract and any added addendums are your roadmap to closing. They detail everything from the purchase price and closing date to inspections, repairs, and who pays for what. Don't just skim through it! Take your time, understand each clause, and don't hesitate to ask your real estate agent (or consult a lawyer) for clarification. 

The Offer

Imagine you see a delicious slice of pie at a bakery. You point at it and say, "I'll take that!" The baker smiles and nods. Does that mean you're guaranteed the pie and that it is your slice? Not quite yet. In the world of real estate, your initial offer acts similarly. It expresses your interest in buying the property at a specific price and lays out your terms (closing date, due diligence terms, contingencies, etc.). But, just like the pie, the seller has the final say.

Earnest Money and Due Diligence

To show you're serious about your offer, you'll include earnest money and due diligence terms in your offer. 

The Earnest Money deposit is a good faith deposit, typically held by a neutral third party (like a closing attorney) in escrow, that goes towards the down payment at closing. If you back out of the deal without a legitimate reason outlined in the contract (like inspection issues), you might forfeit that money. On the flip side, if the seller pulls out without justification, you might be entitled to get it back, along with additional damages. 

The Due Diligence fee is a non-refundable payment directly to the seller to take the property off the active market for a set period of time that allows the buyer to inspect and evaluate the property to make sure that they want to purchase it. During this time, the seller cannot accept any other offers. If a buyer decides during the Due Diligence period that they do not want to complete the transaction, they will receive their Earnest Money deposit back.

From Offer to Contract

There are two main ways your offer can turn into a contract:

1. Simple Acceptance: This is the real estate equivalent of the baker saying "Yes, the pie slice is yours!" and takes your money. The seller loves your offer, signs it without any changes, and whoosh! You have a binding contract. Both parties are legally obligated to fulfill their end of the bargain.

2. Negotiation: More often than not, the seller might have some counterpoints. Maybe they want a higher price or a different closing date. Maybe they want a shorter due diligence period or a larger due diligence fee. This back-and-forth, submitting counteroffers, is the negotiation. You can accept their counteroffer, propose your own revision, or walk away entirely. Once both parties agree on all the terms and sign the final document, you've officially tied the knot (with the property, that is).

When you are working through real estate agents in North Carolina, the transition from offer to contract can actually happen BEFORE both parties have finally signed the contract. In NC, once all terms are agreed upon and communicated in writing (email or text message), the contract could be enforced if needed in a court of law, depending on a judge’s ruling. It is still very important to get everyone’s signature, and that should happen immediately for proper and full legal compliance to protect everyone’s best interests, but offer acceptance can and often does happen before. 

The Statute of Frauds

There's a reason all this signing happens. It boils down to a legal principle called the Statute of Frauds. In North Carolina, real estate contracts involving more than a certain amount (usually around $500) must be in writing and signed by both parties to be enforceable in court. 

Seeking Professional Help

While this blog provides a general overview, the real estate buying process can get complex. Considering the significant financial investment involved, it's always wise to  consult with a qualified real estate agent and potentially a lawyer to guide you through the offer and contract stages. They can help you craft a strong offer, navigate negotiations, and ensure the contract protects your interests.

Remember, buying a house is an exciting journey! By understanding how offers transform into contracts, you'll be well on your way to claiming that "Sold!" sign and settling into your new home.

After years in advertising and marketing, living and working for companies in Georgia, North Carolina, and China, I decided to acquire my real estate license so I can use my established marketing and communications skills to help others and work for myself.

For many people, buying and/or selling their home is one of the most important and most stressful times of their lives. Having an advocate and an agent who has experienced years of corporate marketing, managing teams through challenging projects with tight deadlines, and negotiating complex deals - will aid in the home buying or selling process.

If you or anyone you know is interested in real estate investment, a personal real estate search, or property management, please reach out to me directly - I would love to provide my services to help find your goal property as soon as possible.

David “Bo” Hardegree, NC Real Estate Broker
Espin Realty
[email protected] 
704-748-0958