.jpg){kind=logo}
Published May 13, 2022
A Big Change to the South Carolina Purchase Agreement
How South Carolina’s purchase agreement is changing on June 13.
Today we want to talk about a significant change to our residential purchase agreement. The change will take effect on June 13, 2022, and it will have a huge impact on the inspection process when buying or selling real estate.
Currently, there are three options to work through the inspection period. First, a buyer can use the "repair clause" to ask for any repairs they would like the seller to make, and if the seller agrees to those repairs (particularly those mentioned within the current purchase agreement) the deal moves forward. If the seller declines any of the contractually obligated requested repairs, the buyer has the option to terminate the agreement and keep their earnest money. The second option is a "due diligence" period; however, that option has typically not been used often as it is seen to weaken the offer when compared to the repair clause. Finally, there is the "as-is" clause, which means the buyer agrees to purchase the property regardless of the current condition. Effective June 13, the contract will change to only allow for a due diligence period. North Carolina and Georgia already have similar clauses in their purchase agreements, but our South Carolina purchase agreement will work a bit differently. The due diligence period is a date that is agreed upon by the buyer and seller. Within that period of time, the buyer can choose to conduct any and all inspections on the property, decide to terminate the agreement, or decide to move forward with or without repairs requested. The revised sales contract will stipulate that the due diligence period will end at 6 pm on the chosen date. That date and time signifies when the buyer must notify the seller of their decision to continue with the purchase or terminate the sales contract, and can only be extended by agreement between all parties.“We will become experts in this new due diligence period by June 13.”
Many people feel that the due diligence period favors the buyer in the transaction; however, keep in mind that the seller is no longer obligated to make any repairs that are requested by the buyer based on an inspector's recommendations. Also, if the buyer decides to walk away due to the seller not making repairs (or for any reason) during the due diligence period, the buyer must pay a "termination fee" to the seller. The termination fee should not be confused with earnest money. The termination fee is different from earnest money in a couple of ways; 1) It is not held by the closing attorney or the real estate brokerage, and 2) Should the buyer opt to terminate the purchase agreement within the due diligence period, the termination fee is paid by the buyer directly to the seller. If the buyer fails to deliver the termination fee to the seller by 6pm on the last day of the due diligence period, they could then forfeit their earnest money. Whatever amount is mutually agreed upon as a termination fee, the buyer must be willing and able to pay that to the seller if they want to walk away for any reason during the due diligence period. This is designed to make the due diligence process equitable for both parties.
Because we have never had to use the due diligence period in the way this new contract will require, it is a completely new process for most real estate professionals in South Carolina. However, we can assure you that each of us at the Upstate Home Team will become experts in our understanding of this new process by June 13, 2022. Whether you are buying or selling, we intend to review this change with you multiple times to make sure you know exactly what is happening and why.
If you have any questions about this new due diligence period or how it affects you, call or email us. We are always here to help.
