Acquiring a home in North Carolina isn’t as simple as signing on the many dotted lines. Like other states, it has rules around homebuying, foreclosures, the division of property in the event of divorce and closing on a home. Become acquainted with the policies that shape the housing market below.
Home seller and buyer laws
What must sellers disclose? North Carolina requires residential property owners to provide buyers with a disclosure of the property’s condition. Property owners selling their homes must use the Residential Property and Owners’ Association Disclosure Statement to do so. The form asks owners to provide information such as the year the home was built, details on its heating and cooling systems, whether it is susceptible to flooding and if it is embroiled in any zoning violations.
How does foreclosure work? In most cases, residential property foreclosures in North Carolina are nonjudicial foreclosures, which means the lender does not have to go through the court system to begin the process of foreclosure as long as the deed of trust contains what is called a “power of sale clause.” Under a power of sale foreclosure, a trustee has the power to sell the property on behalf of a lender if the borrower defaults. However, this can happen only after a court hearing authorizing the power of sale foreclosure.
How is property divided in divorce? North Carolina uses equitable distribution laws to divide marital property in a divorce. In an equitable distribution state, the couple’s property is divided equitably, based on the value of their assets. Assets are not necessarily subject to a 50/50 split. The couple might decide not to evenly split proceeds from the sale of a house in a divorce, or agree to allow one spouse to take the house and another to take an asset of equal value. If the court is involved in the division of property, it will take into account factors such as the duration of the marriage, the income and health of both parties and the need of a parent with child custody to keep the marital residence.
Does a lawyer need to be present during a home closing? Only licensed attorneys may perform services critical to a residential real estate closing in North Carolina. Those services include providing opinions on the title to a property, offering legal advice or counsel and drafting legal documents. The North Carolina State Bar considers a closing as a collection of specific services that involve the practice of law, and state law prohibits anyone who is unlicensed to practice law and not working under the direct supervision of a State Bar member from providing services that are considered legal services.
However, a professional who is not a lawyer can attend a closing and provide closing documents, direct the parties where to sign and receive and disburse funds for closing.
North Carolina’s real estate transfer taxes are assessed at a rate of $1 per $500 in the home’s sale price, or 0.2%. This cost can increase depending on where you live. Seven counties in North Carolina — Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans and Washington — also levy a local real estate transfer tax of about 1%, depending on the sale price of the home for sale.
Property tax bills in North Carolina are relatively low compared with the rest of the country. In fact, North Carolina has lower property tax rates than all but 14 of the 50 states, according to Tax-Rates.org. The average tax rate is 0.78%, making the median property tax in the state $1,209 based on a home worth the median value of $155,500.
North Carolina offers three property tax exemptions that can lower tax bills for homeowners who qualify. Homeowners who are 65 years or older, or disabled, can qualify for a homestead exclusion if they meet certain income requirements. Disabled veterans also qualify for an exemption if they sustained a service-oriented, permanent or total disability. The benefits also extend to the spouses of disabled veterans, as long as they have not remarried.
Another exemption, the Circuit Breaker, applies to residents who meet four qualifying conditions. They must be North Carolina residents and at least 65 years of age, and they must have owned and lived in the property as a permanent resident for five years and have an income of no more than 150% of the income eligibility maximum.
Conforming loan limits
In all but three of North Carolina’s 99 counties, the conforming loan limit for 2019 is $484,350 for one-unit homes. The three county exceptions are Camden, Perquimans and Pasquotank, where loan limits for single-unit homes are $625,500.
Conforming loans are residential mortgages that meet limits set by the Federal Housing Finance Agency (FHFA), and which are eligible for purchase by government-sponsored entities Fannie Mae and Freddie Mac.