We decided we needed a little vacation at the end of October so Andrew booked us an Airbnb in Wilmington. And then we decided we might as well try to look at houses in Wilmington one more time while we were there. We made plans with our special Wilmington Realtor to see seven houses before heading home on Halloween Sunday.
Part of our motivation for buying a house in Wilmington is to have a place to stay when we visit so it needed to meet the following criteria:
- Location close to interesting things to do, see, and eat
- Location that would allow for a short-term rental permit
- Off-street parking required for a short-term rental permit
- Layout that we would enjoy living in and that visitors would also enjoy
- Good looking house
To be honest, of all the houses we saw, none of them really met all of these criteria perfectly. But we narrowed our choices down to two possible options pretty quickly after driving home and before joining our neighbors for Halloween evening festivities.
The Cute House:
- Very close to the Castle Arts District, and about a mile or less to the Historic Riverwalk, Cargo District, and what I have dubbed the Pizza District
- Location currently does not allow for a short-term rental permit
- Long driveway along the side of the house would allow for plenty of off-street parking and a very large backyard (a large backyard is more work, but also more potential for adding an extra rental unit)
- Good layout with 3 bedrooms and 1 bathroom. Updated interior.
- Good looking house
The Sensible House:
- Very close to the Cargo District, but 0.6 – 2 miles from all of the other interesting commercial areas
- Location allows for a short-term rental permit
- Driveway from the side-street leads straight to the backyard which has space for 2 cars at the expense of having a useable backyard
- Good layout with 3 bedrooms and 2 bathrooms
- If you’re able to look past the plastic siding, it’s a potentially good looking house with a few updates. It does have more original interior features.
Ultimately the main deciding factor was that the Sensible House is in a location that currently allows for a short-term rental permit. But let me explain a little more about that. According to the City of Wilmington, “All owners wishing to operate short-term lodging of any kind must register.” However, someone sued and a judge ruled to repeal the ordinance because it conflicts with a provision in state law. But then obviously the city decided to appeal the ruling. Ultimately I have no idea if Wilmington will be able to enforce their permit system or not.
But it took until the afternoon of Wednesday, November 3rd for me to finally pull the trigger and get our special Wilmington Realtor to reach out to the seller and see if they would take an offer of 82.5% of list price. Like we were offering way less than they were asking. Five minutes later our special Wilmington Realtor called me to say that yes, they would take my offer but wanted me to cover some of our special Wilmington’s Realtor’s commission, and did not want to make any repairs to the home. I agreed to this along with a $100 Due Diligence Fee and a 1% Earnest Money Deposit.
Before I go any further, let me give you some context on all of the above. Homes I’ve been showing in Raleigh sell for an average of 5% above list price, with more popular homes selling for an average of 10% above list price. I don’t have stats for the Wilmington market, but from what I’ve seen, it’s pretty similar. So I felt a little bold making such a low offer (17% below list price) but I also wasn’t going to be too upset if they didn’t accept my offer.
If you’re not familiar with Earnest Money, it’s a type of security deposit offered to show the seller of a home that you’re serious about purchasing the property and it provides them with some compensation in case you back out of the deal without a valid, contractual reason. It is typically 1% – 3% of the sales price so our offer was in line with that. The Due Diligence Fee is an additional deposit that gives the buyer the right to terminate the contract for any reason or no reason during the Due Diligence Period which is usually about 3 weeks. This money goes straight to the seller once the offer is accepted and is non-refundable except in the event of a material breach of this contract by seller. In the Raleigh market, I’ve heard stories of $20,000 to $70,000 Due Diligence offers so our offer of $100 is definitely not in line with that. But luckily for us, it means that if we decide to back out for any reason in the next few weeks, we’ve only lost $100… and whatever amount we spend doing our due diligence.
The Offer Acceptance
For reasons I still don’t understand, our special Wilmington Realtor didn’t have the offer ready for us to sign until late Thursday night, and the offer didn’t get accepted and signed by the seller until the evening of Sunday, November 7th.
It was upon learning that we officially had a contract that we also learned that the seller’s name is not listed on the tax records or on the deed for the property, which left me trying to figure our if the seller even owned the property. After asking a few more questions, we were told that the seller had purchased the property as a Land Contract. A land contract is when the owner of a property agrees to finance the sale for the buyer. The buyer typically gives the seller a down payment and makes monthly principal and interest payments until the full contract amount has been paid. It is not until this point that the deed and title is transferred to the buyer. In order to simplify this, we were told repeatedly that the seller was working with lawyers to fully payoff their loan.
As part of our due diligence, we had an appraisal done. The appraised value of the home came in above what we’d agreed to pay for it, but below what the sellers were asking, so I guess that’s probably the best scenario to leave both parties feeling okay about the deal. The other big piece of due diligence was the inspection. If you’re in the market for an inspector in Wilmington, let me know – ours was great. He was able to pinpoint enough problems with the house that, although it still felt like a good financial deal, made me question if I really wanted to tackle all the work that would be needed to get this house up and running. I decided to ask for a further price reduction. The sellers were quick to agree, and we landed on a purchase price that was 80% of their asking price, with them now paying all of our special Wilmington Realtor’s commission.
Leading up to our closing date, I contacted our lender to see if they needed anything else from us and if we were on schedule to close. They said everything looked good on their end and that I should also reach out to the lawyers. The lawyers said everything looked good on their end and that I should also reach out to the lenders. Two days before we were scheduled to close, somebody finally figured out that the seller didn’t hold the deed for the property. So we had to write up a new offer to the actual owner of the property, which he thankfully agreed to sign. I’m still trying to confirm that the original sellers won’t have any claim on the property….
But yesterday, only a week late, we closed on this new Wilmington, NC short-term rental property!
I promise to share some pictures next week, as well as my plans for fixing up and decorating the house.