NC Offer to Purchase and Contract Form 2-T Explained
The NC Offer to Purchase and Contract Form "2-T" is the most widely used contract form in North Carolina for the purchase and sale of real property resident in North Carolina. The form is actually "Form 2-T" of the standard form contracts created, updated and maintained by the North Carolina Association of REALTORS®, Inc. (abbreviated as the NCAR) and the North Carolina Bar Association’s Real Property Special Committee (abbreviated as the RPS). As of this writing, the most current form is the "2018 Form 2-T", and is arguably the most up-to-date version ever produced. The new "2-T" has taken large steps towards closing a few gaps found in the prior two forms.
Of the "2-T" forms out there in circulation, there are two that are primarily used in NC. Those are the "National Version" and the "State Version." The differences between the two forms are harmless and revolve around either north/south designations (North Carolina or S.C.) or federal laws that affect NC differently than they do its neighboring states. The forms also have date edits on them, but those are only significant if you are conducting a transaction that is governed by the date on the contract. (For example, some federally-backed loan programs have deadlines by which you must close. According to those contracts, default may be found if you have not closed within a certain period of time as to the contract’s signing date, and as a result, the seller can terminate the contract and keep YOUR earnest money. My favorite line to our clients when talking about these short sale contracts is always , "I can’t make a strawberry taste like daffodil, and either way, it’s still a strawberry.")
If you are a buyer, you would be crazy not to contract listed properties using the "2-T." There are a few major reasons as to why you should. The first is protection of your earnest money deposit. Your entire compensation for buying a property as a buyer is your earnest money; in the event of a dispute there’s no bonus commission for you. So, you need a robust explanation of when you will or will not get your money back. NCAR has put together a collection of provisions for you to handle that risk, which I always suggest in any proposal to contract a property.
Next, the 2-T gives you protections as to performance. Your performance affects the contract; in most cases if you were to cause a delay in closing, you would receive penalties. If you are a seller, and you want to cancel on a buyer if they have not performed, there’s a listing fee for that which puts pressure on the buyer from the get-go. If the buyer does not meet their obligations, you then have a path to contract termination without forfeiting your listing commission when you "go back on market."
There are a number of additional sections of the "2-T" that provide unique remedies to sellers for a buyer’s breach, or other seller options, including contract-specific addendums.
The bottom line is a listing agreement will not protect you; you need your own counsel (not the seller’s or listing agent) to advise you on how to proceed in the case of a breach by the buyer or seller.
Essential Sections of the Form 2-T
Buyer and Seller Obligations:
The first main sections of the form layout the obligations of the buyer and the seller. A key area of focus may be the closing date where either party may select the date of closing, or they may leave it to a specific or indefinite period. When selecting a specific date, stating the date only (December 1, 2016) is sufficient, but if a seller is still making repairs prior to the date of that closing, it may wish to make clear it will not close until all repairs are complete. If a seller needs flexibility in selecting the closing date, it would use "on or before" rather than on or after, as "on or before" will only require a seller to close if all the terms have been met and demand is made in writing from the buyer at least three days before closing.
Property Details:
Form 2-T includes several sections to fill in on property specifics, such as the address and identifying details about the land and any improvements separately. Form 2-T also contains a section referencing "Permits" which is a free space to list any particular permits relevant to the transaction.
Purchase Price:
Another key component included in the form is the negotiated purchase price, which is what the seller is receiving for the property. The key area to focus on here is the manner of payment. Form 2-T offers a section stating that the buyer is assuming the seller’s loan, rather than making a down payment; however, if the seller is remaining responsible on that loan, it could be problematic in the event the seller has a significant liability under the loan or other credit issues. It’s important to consult with legal counsel before using this type of provision when the seller is not receiving a portion of the proceeds from the sale.
Buyer’s Initial Deposit and Due Diligence Money:
The due diligence fee and initial deposit are both negotiable and are not prescribed by statute or regulation. Commonly, the due diligence fee is paid upon acceptance of the offer to purchase and is made out to the buyer. The due diligence fee is nonrefundable, but it’s negotiable whether it’s applied to the purchase price at closing or paid directly to the seller as seller credit.
Completing the Form 2-T Accurately
The NC Offer to Purchase and Contract Form 2-T is an important real estate document in North Carolina, and the National Association of Realtors® has designated it as the form of choice to be used as the North Carolina Realtors’ Standard Form. Once the form has been successfully and completely filled out, it becomes a legally binding contract between the buyer and seller.
As such, it’s crucial to understand how to fill out the form correctly, to avoid any future problems or misunderstandings. This section will provide a thorough yet straightforward walkthrough of how to correctly fill out the NC Offer to Purchase and Contract Form 2-T.
Step 1: Read the Entire Form
Although it may seem tedious, it’s vital to carefully read through the entire form before completing it. By doing so, you’ll gain a better understanding of all the requirements and necessary disclosures that must be included.
Step 2: Provide Correct Parties Information
The contract requires that the full legal names of all parties involved in the transaction should be provided, both on the buyer/seller and the agent/broker sides. When filling out the "Property Address" section of the form, be as specific as possible.
Step 3: Deal with Additional Terms and Conditions
Commonly confusing, this section of the contract is where you will include any additional instructions that may exist. Be specific, so that there are no future disputes over what should take priority.
Step 4: Double Check Everything
A simple error or omission could make your contract void. Remember to double check that all parties have signed, and that you’ve provided a valid contact number, the correct commission due upon settlement, and that the closing date and deposit amount are all accurate.
Step 5: Review Again
Go over the contract once more with your buyers or sellers after they’ve signed it, before submitting it to the agent or broker for processing.
Step 6: Preserve Your Contract’s Accuracy
Make sure all the information contained in your Offer to Purchase and Contract Form 2-T is as accurate and complete as possible. If anything is unclear, don’t hesitate to ask the seller or their representative(s) for more information. The more clearly you can communicate, the more successful you will be in detailing any potential issues or contingencies.
Fill Out the NC Offer to Purchase and Contract Form 2-T as Thoroughly as Possible
As explained above, a properly completed NC Offer to Purchase and Contract Form 2-T should not be taken lightly. Although the process of filling out the form may take some time, it is well worth it to ensure that you have not left any important fields blank, or that you did not omit information unintentionally. For example, if a serious repair issue is left unmentioned in the "Additional Terms" section, this could result in a breach of contract.
It is essential that you feel confident about your answers before agreeing to something you were unsure of. There are many ways to confirm important details, from searching for properties with an experienced real estate agent to checking with your lawyer or attorney.
Form 2-T and its Legal Consequences
The Offer to Purchase and Contract Form 2-T is legally binding once signed by all parties. When a seller or buyer signs this form, they are entering into a contract. This means that they are legally obligated to comply with any other provisions contained in the contract including but not limited to items such as inspection dates, repair requests and/or closing dates. A contract is not until the last person signs the form. The seller of the property is bound by the terms of this contract to the buyer unless the buyer has failed to fulfill his or her obligations in a proper and timely matter by violating a term of the contract . If the seller has signed the contract and then refuses to sign closing papers he can still be held in breach of the contract.
Even a verbal agreement for the sale of a home may be considered a legal contract; however in order to be legally enforceable the contract must be in writing and the party against whom it will be enforced must sign the contract. In North Carolina the Statute of Frauds, N.C.G.S. § 22-2 require that certain types of contracts be in writing in order to be legally enforceable. The Statute requires that all agreements to sell real estate or lease real property for longer than three years be in writing. The Offer to Purchase and Contract Form 2-T meets this requirement and is in writing.
Common Questions About the NC Offer to Purchase and Contract Form 2-T
Acknowledging the possibility that you might not be a lawyer, there are questions you might have about how the NC Offer to Purchase and Contract Form 2-T works. It’s been a mystery for centuries if I remember correctly. Here’s a list of frequently asked questions to cover some of those questions:
Can the NC Offer to Purchase and Contract Form 2-T be modified?
Yes. Any part of the NC Offer to Purchase and Contract Form 2-T can be negotiated and agreed to between the parties to the transaction. It is a starting point which should assist the parties in simplifying the terms agreed to by each party concerning the real estate transaction.
Can either party terminate the contract?
Yes. Under Section 14. Complete Agreement of the NC Offer to Purchase and Contract Form 2-T the parties can agree to release either party even if the purchase price and closing date have not been fulfilled. Section 14 is really about the agreement between the parties. It is not an option for either party to walk away from a party’s obligation under Section 10. Due Diligence Period and Section 11. Closing.
Can the NC Offer to Purchase and Contract Form 2-T be used for a transaction where a mortgage is not being taken?
Yes. However, the due diligence period which is for the buyer to inspect the property and not necessarily being contingent on the 3-day right to rescission of the loan to potentially terminate the obligation of the buyer to close on the property.
If all the parties agree to modify the NC Offer to Purchase and Contract Form 2-T, does that modification have to be in writing to be enforceable?
Yes, any modification must be in writing and signed by both parties under Section 14. Complete Agreement. The statute of frauds requires it. Article 28 of the NC Bar journal (March 2011 pg 64-65) has some really good information on the statute of frauds, which requires all contracts for the sale of real property to be in writing.
Does the NC Offer to Purchase and Contract Form 2-T contain contingencies?
Yes, but this contract has an option period for the parties to walk away from the transaction rather than a closing date. The due diligence period can be negotiated between the parties and there is a timeline for the buyer to know what will happen. If the buyer requests to walk away, the seller can counter the request if they want to sell the property.
Does the seller have to pay a real estate agent a fee under the NC Offer to Purchase and Contract Form 2-T?
No. The seller does not have to have their real estate agent receive a commission from the sale of the property and can negotiate the commission set by Section 16. Person to Prepare. It can be negotiated and changed between the parties.
Form 2-T: New Changes and Modifications
In April of 2018 we saw the latest updates made to the NC Offer to Purchase and Contract Form 2-T. Many of these updates were stylistic in nature, but there was one issue that may give both buyers and sellers of residential property some pause.
This change relates to Section 9 which deals with the "Settlement Documents to be Delivered to the Closing Attorney" and how the buyer or seller directs each closing attorney to make disbursements from the proceeds of the sale. Heading into the update, the form had little guidance other than a bulleted list of various documents related to a real estate transaction. Heading out of the update, Section 9 now has more specific instructions for the buyer and seller to select how their funds are distributed at each opening of their closing attorney’s trust account. Bullets 17 through 19 now have corresponding lines to allow a buyer or seller to select between three different options for how that particular document should be treated. The three options are: 1. Apply to the amount owed my mortgage(s) , 2. Disburse to me or my agent as requested in a separate email, or 3. Disburse as else specified below. The options for how to disburse any check that is part of the settlement documents continues through all 22 bulleted items. Finally, the form ends with a general language confirming that it should not be altered.
Right now this change has only been in effect for one full month and only time will tell how it will play out in practice. In its current iteration, if there is any ambiguity to the order of how money should be paid out, would it be better to have a bullet that reads, "Disburse as else specified below." As opposed to a new laundry list of items where the distribution is predetermined by the buyer or seller’s selection? Likewise, this new system still leaves open the possibility that a buyer or seller may not select their method of payment, leaving their funds available to be paid out as the circumstances dictate.