What is the 2-T Form?
Whether you are buying or selling a home in North Carolina, there are some forms that are commonly used in real estate closings. One of these forms is the Offer to Purchase and Contract Form 2-T, or Form 2-T. Form 2-T is a standardized real estate contract that is used extensively by North Carolina real estate attorneys for purchase transactions. In fact, N.C. General Statutes refer to the use of Form 2-T in real estate contracts in Section 22 and Section 22.1.
North Carolina General Statute 47-50 states that Standard Form 2-T, "Offer to Purchase and Contract (Residential Contract/Offer)." is the approved form to be used when an offer is made to purchase residential property. The statute also states that, "a listing by an owner to sell residential real property or a contract by an owner to sell residential real property shall be deemed to authorize use of the form . " A person making an offer to purchase residential real property shall have the right to use this form or any other written contract, except that real property shall not be agreed to be sold on a bond for title, agreement for deed, or lease with option to purchase.
The Offer to Purchase and Contract Form 2-T includes terms addressing due diligence and financing as well as information regarding the parties’ rights to cancel the contract under certain conditions. Form 2-T further provides for customary provisions regarding repair procedures and home inspections. There is also language stating the rewards and penalties and the remedies available to the buyer and the seller if the other party breaches the contract or takes an action that delays the closing of the transaction.
Getting Familiar with the Components of Form 2-T
The buyer and seller information sections allow the parties to identify their legal names and the respective addresses used for service of process. While the address must contain a street name and number, it is not required to be a physical address that the parties stay at for service of process. A local business address, or the address of an attorney or agent, may be used.
Information about the property is filled in on the specific property lines. The property description may be addressed property, but if so, it will need to be described on Exhibit A (which is an additional page attached to the form) as an address, plus the "city/county" lines are only for the city, county or town in North Carolina where the property lies. A recent survey will often be helpful in completing this section. If the property has not been subdivided, it is not required to have a PIN#. If the property has been subdivided, two PIN#s will likely be listed on the deed/register of deeds for the property; however, since we need to provide an accurate description of the property, two PIN#s and two descriptions should be included if there is any question whether the property has been subdivided.
The offer price, due diligence fee, due diligence period deadlines and closing date are all agreed upon in this section. The due diligence fee will be credited back to the buyer at closing or applied to the down payment or closing costs. If the buyer terminates the contract during the due diligence period, the due diligence fee will be forfeited to the seller.
Filling Out the Form 2-T
When a buyer has chosen a property to purchase and the seller has chosen the buyer, the parties get together and complete an Offer to Purchase and Contract Form 2-T electronically. It is the PURCHASER’s responsibility to make sure that everything is correct. If the PURCHASER is working with an agent, make sure that the agent has NOT filled in the blanks before obtaining the PURCHASER’S signature.
The PRE-REALTOR ITEMS of the form 2-T have already been pre-printed and many sections contain standard information such as the listing agent, the listing firm, the selling agent and the selling firm. This information should be checked for accuracy. Blanks to be filled in by the offeror are REVISED BY OFFEROR; REVISED BY SELLER and PROPOSED CLOSING DATE. You may click on the calendar icon to choose the date for closing. This will fill in the date box with the correct day/month/year combination.
Many other items are filled in with blue ink or black ink by the submitting (purchaser’s) agents or sellers. This is perfectly acceptable as long as the categories for filling in numbers are left blank with a "zero" included. For example – in the category for sales price, the purchaser or the agent for the purchaser can write in the $ amount in blue or black ink, but the boxes for wording ("Fifty Thousand") and the boxes for numbering ("50,000") must have a "zero" placed in the far right blank. Doing this prevents the possibility of later changes to these numbers by the seller, the purchaser, the purchaser’s agent or the seller’s agent.
If blanks are empty, it allows the agents in the transaction to later write in the numbers for the missing blanks. This could leave an opening for fraud. Using the zero prevent the blanks from being empty.
Form 2-T and the Law
When the Offer to Purchase and Contract Form 2-T is signed by the buyer and seller, the purchasing party is held to legally binding obligations. The Offer to Purchase and Contract Form 2-T becomes a contract and the buyer now has specific obligations to the seller. The buyer generally must pay the deposit with the offer or waiver of the down payment. The buyer must also deliver the balance of the down payment prior to or at closing and pay the agreed upon price for the property. When a buyer fails to comply with the provisions of the contract, such as failure to pay the deposit as required, the sellers has the right pursuant to Section 6(c) of the contract to terminate the contract and retain all or part of the deposit based on a sellers written demand request.
By riding the Offer to Purchase and Contract Form 2-T, the seller is protected with three items. The flat fee paid by the seller provides protection in the event of the buyer’s default. By agreement from both parties, the seller retains the right to keep all or a portion of the deposit. The buyers waiver of rights under the 1987 Purchase Money Security Interest Act protects the seller in the event the buyer fails to record the deed in a timely matter. The sellers waiver of rights under NCGS 44-88(a) protects the seller if the buyer fails to satisfy the debt on the property.
Common Errors to Avoid
One of the most frequent mistakes that we see is in the treatment of the due diligence period in the contract. Typically, once an offer is made there will be negotiations back and forth between the parties (sometimes several times) before coming to an agreed offer. The offer may have a reference to the due diligence period ending on a certain date. However, when a contract is executed, the appropriate due diligence period is that specific date as it may have been modified in the negotiations. We recommend that the offer state that the due diligence period end "as amended" if negotiated. It should be understood that the contract controls and not the offer. In addition, the party sending an amended offer for acceptance should not assume that an accepted offer will be executed at the same time and the final contract will be produced at the same time. The due diligence period specified in the offer may be different from the due diligence period in the contract. If the buyer desires to have the due diligence date be the same , then the buyer should specifically state the due diligence period in the offer or in a counteroffer that will be included in the contract.
Another common mistake we see is in the seller accidentally striking through the square foot reference in the MLS and replacing this with another number. This is a no-no! The square foot information originating in the MLS is based on market data provided by a data vendor to the MLS and, typically, has been calculated by multiplying the length of the house by the width of the house, whether or not that information accurately reflects the actual square footage the buyer will receive. Although the square footage in the MLS is not typically accurate, it is a very important negotiation point for a buyer. Because we know it can be difficult to undo the square foot notation from the MLS once it has been edited, it is of utmost importance to do it right the first time.
Form 2-T versus Other Forms
Form 2-T is composed of eleven sections, which are titled as follows: (1) Purchaser identifies; (2) Property; (3) Purchase price; (4) Commission; (5) Payment of purchase price; (6) Closing and possession; (7) Condition of property/title; (8) Material facts; (9) Right of cancellation or rescission; (10) Disclosure statement and (11) Additional provisions.
There are very few illustrations available in the United States of a real estate form that is similar in structure and substance to Form 2-T. The closest example would be an "offer to purchase" form in Ohio. Form 2-T is relatively streamlined when compared to many other nation-wide forms, and a closing attorney is often surprised upon first reviewing it with a real estate agent. More complicated forms would likely contain more explanatory clauses and be considerably lengthier than Form 2-T. Similarly, while the majority of states have adopted a standardized contract for the sale of real property, this is not the case in North Carolina. In other states there may be a variety of agreements available, some of which are statewide standards and others having been made for a specific market. Form 2-T is the only form approved by NCAR for use in residential transactions as such, but is by no means the only form a real estate attorney in North Carolina will see.
Instead of outlining the differences between Form 2-T and another specific form, it is important to note that no other form will perfectly match the needs of a party in a real estate transaction. Form 2-T, having evolved over time to be responsive to issues that have arisen in real estate transactions in North Carolina, will be the closest reasonable approximation of the form best suited to meet the needs of the parties to a real estate transaction in this state but is unlikely to meet them perfectly.
An example of what a real estate attorney might find in another state would be a mandatory form for a seller to use when listing a property if there is a home owners association associated with the property. Such a form requires specific information regarding the fee amount associated with the HOA. Form 2-T allows for additional due diligence to be submitted in the "additional provisions" section of the form, but otherwise does not make specific reference to HOAs.
Seeking Assistance
Purchasers and sellers must be aware of both recent changes and the potential pitfalls of misusing the Form 2-T contract. There is a reason lenders, real estate investors, and those experienced in the field, hire real estate professionals to negotiate the various aspects of a transaction on your behalf and during due diligence to make sure your interest is protected. The Form 2-T was not created for laypersons, therefore the form will, and is likely going to be, changing over the next several months and years . Improperly filling out, or neglecting to fill out certain portions of the form, could leave you subject to liability that may be significant. It is important to remember that no matter how visually basic and drawn out these forms are for your simplistic understanding, a conveyance of an interest in real property is a legally binding transaction. You should always consult with a real estate professional and/or an attorney.