North Carolina is a popular place to live! Many polls rank it high for livability, and we agree. Between the beaches, the mountains, and the tasty BBQ that we’re known for, NC has always been a popular vacation spot. But now, it’s becoming a relocation destination as well, from snowbirds escaping northern winters to an influx of tech folks leaving Silicon Valley and other regions where real estate is extremely pricey.
The Triangle, made up of the cities of Raleigh, Durham, and Chapel Hill, has a population of just over 2 million and is equidistant between the mountains and the beaches. Raleigh consistently shows up on lists of best places to live, and data from moving companies backs up the increasing numbers of new residents.
There are many big-city amenities our residents enjoy, including international airport RDU, innovative chefs and dining experiences, parks, greenways, and outdoor activities that take advantage of our moderate weather and temperatures.
What’s it like to buy a home in the Triangle? Here are the basics for buying a home in NC, including some advice on handling a “hot” market.
Using our advanced home search, create a search with all of the requirements for your new home. Make sure to adjust the price range, location, year built, and any other important criteria so that your listing alerts match your conditions. Keep yourself organized by adding each home that you are interested in to your "favorites" list. If nothing catches your eye right away, be patient! New homes are listed every day.
When are you are ready to compare homes in person, contact us to set up an initial consultation and showing schedule.
It’s always best to get a pre-qualification letter from your lender ahead of time. This saves a lot of time and enables you to move quickly when you find the right home. If you need recommendations, we can point you in the right direction. For more information on the home loan process, please click here.
When you find the right home, you submit an offer to purchase and then negotiate verbally with the seller until an agreement is reached and the new offer to purchase is signed by both parties and you are “under contract.”
This is the time you perform any needed inspections and, if you’re financing, the time when the bank appraises the property. You will put a due diligence deposit down, traditionally between $2000 and $5000. The due diligence money is separate from “earnest money” and is tied to the health of the market and the number of other offers, so in a highly competitive market, the due diligence can be much, much higher (we've seen $100,000).
Here’s where NC is different from other states. If you close on the property, the due diligence deposit is applied to the total sale price. But if you terminate - for any reason - you lose the due diligence monies and other money you may have paid for inspections or appraisals. This provision is designed to protect sellers who are taking their property off the market to allow you time to complete due diligence. It is a hot topic, but one that the Real Estate Commission has stated they do not intend to change any time soon.
After the due diligence period ends, you are in the “pending closing period.” This is the time when the lender provides a loan package and closing statement, which has all the charges associated with the purchase and gives you the dollar amount to bring to closing.
Technically the standardized offer form says that buyers are purchasing as-is, however most buyers and sellers do conduct some repair negotiations. The seller is not required to make repairs, but they are incentivized since if the buyer backs out of the contract their seller's realtor is required to disclose all repairs that came up during the due diligence period.
Depending on your attorney, closing usually takes about 20 minutes for a transaction without financing and 45 minutes with financing. You will need to bring all monies needed (usually in the form of a wire) and your driver’s license to closing.
Buying a new home is very different from a resale purchase, so we created a special guide for this process, available here: New Construction Guide.
New construction has been constrained over the last year or so as costs have increased for lumber and other raw materials. This has led to builders not being able to accurately estimate the length and cost of construction; some are no longer taking any orders for new homes.
Even as the price of lumber is coming down, you can expect delays between 2 and 3 months for new construction. Meaning if the builder tells you 6 months it will be 7 to 9 currently. Hopefully in the future this will be a thing of the past. New construction homes are also in low supply, although hopefully that will change once lumber prices return to normal.
No one has a crystal ball of course, but there are not a lot of factors in play in the Triangle that are likely to significantly decrease housing prices any time soon. Remember, that housing is a long-term investment, so it’s smart financially to purchase when you could see yourself in the home for at least 4 years. If you just like owning, then it’s fine if you have to sell sooner, but there’s more risk of losing some money on the purchase in that scenario because of transaction costs.
Here’s another factor to consider. Every neighborhood in every city is not experiencing bidding wars, paying thousands over asking, and thousands more in due diligence. The market is different within each city, which is why it’s helpful to have an agent who is familiar with each area. There are areas that are selling for asking price or under asking price. I have the good fortune to have lived in several areas in and around the Triangle so I am familiar with these areas.
Finally, when the 2008 housing crisis hit it took roughly 2 years for the market to recover in the Raleigh/Durham area. This gives you an idea of how long you would need to hold the property in the event that happens again, which hopefully won't happen but it's always smart to prepare for the worst!
Okay, let’s get the bad news out of the way first. In the most competitive neighborhoods, the homes that are up-to-date (and don’t need work) are selling over asking price with multiple offers. Some are selling $50,000-$100,000 over asking price.
Because of my experience with real estate in the Triangle, I can take an address you’re interested in and give you a fairly accurate idea of how much over asking a house might go for. I can also help you figure out where your comfort point is. Let’s say you find a house you really want, and you ask what the chances are of successfully buying the house. I can advise you at different price points, so if you go “x” over, you have a 50% chance of getting the house, but if you can extend to “y,” your chances go up to about 90%.
Your other risk in these hot markets is the appraisal gap, where you’re paying what the market will bear, but the banks - although they consider the popularity of a market - still appraise under your purchase price. In less competitive markets, sellers might be willing to negotiate on the difference, but that’s not likely in a highly competitive setting.
Instead, many buyers in this market guarantee their full offer price as a competitive edge even if it means they must bring more money to closing to cover the appraisal gap.
It’s important to note that in North Carolina, the sale of a home is not contingent on a satisfactory valuation. If the appraisal comes in lower than the contract price, then the buyer is not automatically let out of the contract. This is also where due diligence money comes into play again because if you back out of the deal, you lose the due diligence money.
In the most competitive neighborhoods, such as hot spots near downtown Durham and Raleigh, buyers are waiving inspections on houses. Why? It makes their bids stronger, for one thing, and for another, a seller's market means that sellers are not inclined to fix many of the problems discovered in an inspection anyways. So the thinking is, "If I'm not going to get repairs made anyways, why not waive inspections to set my offer apart from the rest." It is pretty risky though, depending on when the house was built.
The newer the house, the less dicey it is for the buyer because building code improvements means fewer potential issues on average. So, if you’re putting $50k due diligence money down on a two-year-old house, that’s a safer choice than the same money down on a 50-year-old house.
In Wake & Johnston County area, there are spots that aren’t quite as hot and so the prices are not nearly as competitive. This is also true for fixer uppers, which don't get as much interest as a home that's completely move-in ready. For example for the less hot areas, prices may be 10% higher what they were a year ago, but not 30% over. The price you pay over the asking price and your due diligence fee will be lower. So this is another option if you are open to looking at areas that may be a little further away as compared to the hotspots.
If you have any questions about the process, or how to adjust your daily search alerts, please feel free to contact John.Trapaso@eXpRealty.com or 919-656-7087.