While in the past due diligence has been an option in a South Carolina residential property contract, a potential buyer could either use paragraph 8 repair procedure, or exercise the due diligence addendum, which is basically the time period between when a contract is ratified and when the sale is complete. This is when inspections are done in order to discover any defects or repairs that may need to be addressed. The difference between the two basically comes down to what is required of a seller after these inspections, and what responsibilities the potential buyer has in terms of fulfilling the contract under both the due diligence addendum and paragraph 8 repair procedure.
Paragraph 8 Repair Procedure
This section dictated the length of time allowed to complete required home inspections along with what specific items and systems were to be examined. If after the inspection certain areas were found to need repair and/or replacement the potential buyer was required to present a list of items to be repaired. The initial list was not set in stone and could be negotiated until a final agreement was reached. At that point, the sellers had until closing to complete the repairs.
Due Diligence Clause
The due diligence clause, often preferred by buyer’s agents, allows a potential buyer to select a set number of business days to perform ANY due diligence on the property. This may include questions surrounding specific homeowners insurance costs including flood insurance, annual property taxes, sewer/water problems, HOA concerns and more. Basically, anything the buyer wants investigated, the seller will be required to answer before a closing date can be set. If these questions aren’t answered by the due diligence date, then the buyer can notify the seller in writing they are not moving forward with honoring the contract. If the notification is not in writing, then the seller is free to assume the potential buyer will be accepting the property As-Is and the sale will continue.
Recent Changes
Effective June 13th, 2022 the South Carolina Residential Property Agreement to Buy and Sell Real Estate transitioned to only due diligence and removed the previous repair procedure and As-Is option.
During the past two years South Carolina home residential sales have become a true buyer’s market and there has been some blow back to this change. During the due diligence time period inspections may still be required by the buyer and repair requests made. But then the buyer can decide how and if they want to proceed. They now have the option of an amended contract, changing to an As-Is contract or completely terminating the contract, in which a notice of termination and termination fee will be required.
While there are advantages for both parties, in today’s buyer’s market, buyer’s agents will need to ensure any repair requests are made well before the due diligence period expires. That gives the potential buyer enough time to decide if they will accept the property As-Is or if they need to terminate the contract if repairs aren’t made. Also, potential buyers need to be made aware the seller no longer has to respond to any repair requests and be prepared to make a decision should that occur.
Need assistance in making sure there are no surprises when you’re ready to list your home or rental property? Contact us at 874-242-1099 or online at Carolina RES today for a pre-listing home inspection. We are also here for CL-100 termite letters, interior air quality inspections, radon testing, and all the rest of your real estate service needs.
