Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in the
greater Greenville area of South
Carolina I your host as always Stan McCune
I'm a realtor here in the great Upstate
of South Carolina and you can catch all
of my contact information in the show
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things go a long way today we're are
going to be talking a little bit about
the standard contract form that that is
used on almost all
residential real estate purchases in
the upstate of South Carolina what we
call form 310 or scr 310 it's a form
that was developed by the South Carolina
Association of Realtors to standardize a
purchase agreement that Realtors could
become familiar with and that then they
could use to help write offers for their
buyer clients and that listing agents
would then receive and understand kind
of the the main points of it so that
they can then educate their seller
clients on what the offer says now
Greenville is unique in that this is
essentially the only contract form that
is used by Realtors I know that there
are other parts of the state of South
Carolina that use other forms there
are contracts that Builders will
will say that you have to use so if
you're building new construction you
likely will have to use a builder
contract so that is one exception but
otherwise if you're purchasing real
estate here in the state of South
Carolina and in the area of general area
of Greenville Spartanburg Anderson Etc
you will pretty much be making an offer
on form
310 now my company actually the
company I'm with currently sedan Jord
realtor actually attempted to develop
with the help of of attorneys and and
all sorts of different people a contract
that improved on form 310 with the hopes
of giving agents other options other
better options because at the end of the
day form 310 it can be changed by the
South Carolina Association of Realtors
but we only have so much direct
impact on how that can be done or on
what changes will be made and so my
company several years ago attempted to
draft a new contract form but there was
kind of a a in my opinion a mistake that
was made which was that they didn't
involve other brokerages in that process
and so it became a political thing when
that form then came out and when
Realtors attempted to use that form some
brokerages essentially they really
skirted the line of what they could
legally do or not do but they for all
intents and purposes said that they were
not going to allow their seller clients
to accept an offer on that form and it
was really they they claimed it was
because they wouldn't get support from
the South Carolina Association of
Realtors using that form but really it
was just politics and it's honestly
quite frustrating because that was a
superior form in for both parties in my
opinion in comparison to to form
310 that being said there are some
advantages of course to only having one
contract that essentially everyone
uses and that is you know the main
obvious Advantage is that all of us
realtors in The Market Place
particularly those of us that have been
doing this for a long time we're so
familiar with the form that we we
know it you know like the back of our
hand so to speak and the back of my hand
right now is very dry I struggle with
dry hands this time of year and I'm very
aware of that and I know form 310 like
the back of my very dry hand at the
moment this happens by the way every
winter for me and yeah it's my skin
is very white and very dry this time of
year so obviously when you start
introducing other contracts into the
marketplace there are some inherent
disadvantages from the standpoint of
people maybe not knowing all of the
language so I understand that but at
the same time for3 for 310 has some
clear disadvantages to it primarily
stemming from that there's a lot of
things a lot of language in there that
is open to interpretation I specifically
talked about this in episode 26 which if
you are a newer listener and you've
not done a real estate transaction in
the lovely state of South Carolina I
highly recommend you go back and listen
to episode 26 and if you are a
longtime listener you already listened
to that episode I'm not going to rehash
everything that I said so please bear
with me but I do need to review
something very specifically in there in
Section 8 of form 310 it talks about
inspection rights and repair rights
and there are three checkboxes of which
one must be checked and this was a
change that was made last year from what
for form 310 had for so many different
years three checkboxes one Asis Asis is
the the best checkbox if you are a
seller to have checked Asis means that
the buyer is they're still allowed to
inspect the property but they're saying
that they the contract is in no way
contingent on their inspections if they
find out something really terrible in
their inspections they do not have a
contractual right to back out and at
that point it typically that would mean
that their earnest money would be at
risk of going to to the seller at
that point there is a due diligence
check boox due diligence is the complete
opposite end of the Spectrwhich is a
very buyer friendly route to go due
diligence typically used on investment
properties or properties that have a
lot of work that needs to be done on
them or perhaps you know needs some
things to be looked into like
different Records reports
leases things like that due diligence
gives the buyer essentially an out to
back out during the due diligence period
for any reason that they want to so
obviously most sellers are not super
happy when they get an offer that has
due diligence on it but there are
some situations where that is really
the most logical option to check and
then there's a middle ground that we
call repair procedure well the contract
calls it that repair procedure which
essentially means that the buyer can
inspect the property with a licensed
respector with a licensed
inspector man I'm recording this on
Monday and I can feel Monday hitting me
in squarely in the face here they can
have a licensed inspector inspect the
property and then ask the seller to make
repairs to the property but the seller
is only obligated to make repairs that
fit in nine categories we discussed this
in episode 26 go back and listen to that
I'm not going to go through all of that
but the buyer only has a right to back
out essentially and the language is
still even a bit ambiguous when it comes
to this but in essence the buyer can
only back out if the seller does not
agree to repairs in those nine
categories which are extremely limited
categories so what do we think about
repair procedure
well at the end of the day it probably
causes more harm than good and this is
what this episode is about is that the
South Carolina Association of Realtors
is talking about getting rid of the
repair procedure from the contract and
limiting us to only having the Asis and
due diligence options or maybe they
would come up with a different solution
but I assume they would probably default
to probably tweaking the Asis or due
diligence language and just eliminate
repair procedure altogether that's being
discussed well it was discussed some
last year it's going to be it was tabled
till this year it's going to be
discussed I think in a few weeks is my
understanding and so yeah there's a a
good possibility that a year from now
or maybe even less than that we'll be
having another conversation discussing
what section8 of the contract says
but like I said there are some major
problems with repair procedure again
it's trying to strike the middle ground
between being way seller friendly and
way buyer friendly but it leaves too
much open to
interpretation in in other concerns
other things that we run into it really
requires the buyers to make a very
serious assessment of the condition of
the house while walking through it you
have to because of how limited the nine
categories are that the buyer that
the seller rather is obligated to repair
there's really a lot of things that an
inspector might flag that would be a
major problem to a buyer that a an
experienced buyer or an
inexperienced buyer agent I should
say inexperienced buyer or buyer agent
wouldn't notice just walking through
I've been with clients that don't pay
very close attention to the AC unit for
instance and and maybe the seller's
disclosure doesn't State the age of the
AC AC unit maybe the seller doesn't
realize it well let's say the AC unit is
20 years old that's for most units 5
years or more older than a an AC unit
is expected to last Well Repair
procedure does not require the seller to
replace it it only requires for the AC
unit to be functioning well mind you
that during the winter time when it's
really cold it might be hard to fully
assess how the AC is even working so if
someone during their showing of the
house when they're looking at a house
doesn't pay very close attention to the
AC unit they may end up having an
inspection that comes in that tells them
hey the AC unit we think it's probably
working we can't fully assess it but
it's really old the buyer has no
recourse in in the standard language
that's currently in there for for for
repair procedure similarly with a roof
it says in repair procedure that the
seller has to make the roof free of
leaks but what if the roof is free of
leaks but has substantial hail damage
that the buyer did not notice you know
when looking at the house by the way
just as an aside for those of you that
don't know I am I'm not really I'm
not practicing right now I shouldn't say
I'm not really practicing I'm definitely
not practicing this right now now
because it's been you know I've just
been so busy with real estate for
several years now that it's been years
since I have done this but I am actually
a licensed Insurance a homeowners
insurance adjuster actually
technically it would be personal lines
but you guys don't need to to know all
of this I'm a licensed insurance
adjuster I don't practice it anymore I
did for a few years back in the day
but I try to help my clients see those
types of things when we're walking
through the house and and I've done it
multiple times I can look at a roof and
usually be able to identify whether it
has hail damage or wind damage etc etc
even though I'm not a licensed
inspector you still need to have an
inspector look at it but I can
identify some things very quickly from
my experience as an insurance
adjuster but one thing I know having
been in that world for several years is
that if you purchase a home that has
hail damage on it your and and then
let's say that there's a wind storm that
comes through and and blows a bunch of
shingles off the roof or you know let's
just say that at some point you have
more hail damage on top of the old hail
damage and you make a claim to your
homeowner's insurance your homeowner
insurance could come in there and say
you know what there's old hail damage on
here we can't tell the difference
between the new hail damage and the old
hail damage we're not going to replace
this roof and then you're stuck and
essentially the roof is uninsurable that
happens way more often than you realize
it but the repair procedure doesn't
protect the buyer in the event that that
hail damage is discovered on a roof the
roof could be
uninsurable in essence to the buyer but
as long as the roof is free of leaks the
seller has done everything they need to
do and even if the roof does have a leak
the seller doesn't need to replace it
only need to repair the leak and and
they might do that untasteful if you've
ever seen new shingles on top of old
shingles it doesn't look very good so
those are some of the flaws with the
repair procedure that I can understand
why they are considering removing it
and as you can probably assume I think
defaulting to the two options of Asis or
due diligence would in the end be a
positive obviously the one is seller
friendly and the one is buyer friendly
but we as Realtors we've had to learn
particularly the past couple of years
how to find creative ways to strike a
middle ground one thing that we're
seeing very commonly even with repair
procedure offers is that buyers are
saying that they will not ask for a
repair unless it exceeds a certain
amount in essence they're saying we're
not going to ask you know for Ticky tack
little things we're only going to ask
for repairs if they're big if there's a
structural problem if there's there's a
major you know U the AC is or the
heat is not working or something like
that so Realtors will will still be able
to find ways
of still adding in language or modifying
those Asis or due diligence causes so
that it's not so skewed in One Direction
or the other and and I've seen
honestly I've seen offers made with due
diligence currently checked where they
even do that you know there's a a line
currently in the due diligence section
that says that the buyer can ask the
seller for repairs I've seen people
strike that out and just say no we're
doing due diligence but we're not going
to ask for repairs we're just making
sure that the property is that
there's nothing major that needs to be
done to this property so we're already
seeing some of that already happening
but all that to be said if we remove if
that repair procedure essentially
becomes removed we're going to see a
big shift in green will in fact I bet
that there will be some realtors that
will Revolt that will cons continue to
use the old contract because they don't
like the new one if that happens that
would not surprise me at all and we're
going to see a rift for sure if
this happens because it's a very
controversial move but I think by and
large most of Realtors would accept it
and would just have to re almost
relearn their business business
recalibrate how they approach
listings and buyer clients and and I
think in the end that buyers would be
the biggest benefactors because
ultimately the majority of buyers
they're still going to want to be able
to inspect a house to make sure there's
nothing that they're that they're
missing and so most of them are going to
want there to be some sort of a due
diligence period which gives more it
it's more lenient to buyers it means
that they're not limited to just those
nine categories outlined in the repair
procedure and so maybe if they discover
hey the roof has hail damage this could
be an uninsurable Roof then they can
actually say to the seller you need to
replace the roof or else I'm backing out
and getting my earnest money
back that I think is a potential
positive development that could come out
of this and so as I said before there
would be if this happens there's going
to be a massive shift a massive learning
period
and the market the entire real estate
market is going to have to account for
this sellers who are used to repair
procedure are obviously going to push
for as's offers obviously buyers are
going to push for due diligence
offers they're not going to be
comfortable basically waving their in
inspection rights they're going to want
to have some kind of ability to look
at at the house as I've already said
now there is one important little detail
here and that's in the due diligence
section of form 310 there is an optional
termination fee and this is separate
from the earnest earnest money in
essence if a buyer backs out during
the due diligence period they have to
Forfeit that termination fee and then
potentially there there could be a
situation where the earnest money would
also come into play that they would
they would need to Forfeit their earnest
money that that again it's a separate
thing so so those two things would would
be handled separately now currently
when there's a due diligence offer this
field is really very rarely filled out
most of the time there is no termination
fee with a due diligence offer but my
guess is if we removed repair procedure
and went to ASIS and due diligence only
we would see this field needing to be
filled out far more frequently because
sellers would want the buyers to have
some skin of the game to not just be
able to back out for any reason and get
everything back and and it would
probably reach a point where the that
termination fee would honestly become
more important in many ways than the
earnest money because the you know
buyers have a gazillion way they a
gazillion ways they can get their
earnest money back but the termination
fee would really commit the buyer to the
house unless unless they find
something majorly important that
needs to be repaired on it and the
seller not not willing to do that and
so what will the standard termination
fee end up being in this scenario and I
have no idea the standard earnest money
amount right now in in Greenville is 1%
of the contract price would the
termination fee be that probably not
probably be less than that maybe half
that maybe it would depend you
know I think reasonably it would depend
based on the condition of the property
however in the end eliminating the
repair procedure it's far from done deal
I've already said that Realtors and
the scr are deeply divided over this
issue some think that Asis is too
restrictive and due diligence is too
broad and they want to make sure they
still have a middle ground in there but
I've heard from realtors in other states
like North Carolina that they only
had those two options is my
understanding as is in due diligence and
a lot of those Realtors they love it
they think it's the perfect system so
we'll see as the scr discusses this
in a few weeks where they land and I'll
have more information to report to you
guys once I get it but that's it for
today's episode I hope you enjoyed it if
you did please subscribe leave a rating
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all of my contact information is in the
show notes and hope you guys stay safe
and have a great rest of the week
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