Major changes came to the South Carolina purchase contracts on June 13, 2022. While the due diligence period has always been an option, it is now the only option. I will be giving an overview and some tips on how to navigate the due diligence period from the buyers’ perspective.

What is the Due Diligence Period?

First, let’s talk about what due diligence is and what it is not. The due diligence period is an agreed upon period of time after you are under contract where you can do any inspections and gather any information on the home you will be purchasing. For example, you can get quotes for homeowners’ and flood insurance, complete your home inspection, check for traffic and noise if you did not do that prior to the home, etc.

You can terminate the transaction for any reason during the due diligence period as long as you deliver a Notice of Termination form and a due diligence fee by 6pm at the end of the due diligence period. 

The due diligence period has nothing to do with earnest money, financing and appraisal contingencies and termite and wood inspections. 

Pros and Cons from the Buyers’ Perspective

Now, let’s talk about the pros and cons from the buyers’ perspective.

PROs:

  • Buyers can terminate the contract for any reason during the due diligence period.
  • Buyers can ask for anything to be repaired. Previously under our old contracts, sellers were only obligated to repair issues with the electrical, plumbing and HVAC system plus have no structural or environmental issues and convey the roof free of leaks. 

CONs:

  • Buyers would owe the sellers a termination fee if the contract is terminated during the due diligence period. Buyers also owe this fee if the sellers do not want to make repairs and the buyers do not want to move forward with the contract. 
  • Sellers are no longer obligated to repair those six items mentioned in the pros section. Sellers also do not have to even answer the buyers repair requests.
  • If the sellers do not want to make repairs and the buyer does not properly terminate the contract, the buyers move forward with the contract “as is”. Meaning you take the house as you see it. 

Logistics of the Due Diligence Period

Finally, let’s talk logistics from the buyers’ perspective. 

  • Buyers must allow enough time during the due diligence period to complete all inspections, send repair requests to the sellers, negotiate those repair requests and allow time to get the termination fee to the seller if the contract will be terminated. 
  • If the contract is not terminated properly (meaning the seller does not receive the termination fee and notice of termination form by 6pm on the due diligence date), the buyer will be moving forward under an “as is” contract. 
  • The due diligence fee must be sent directly from the buyer to the seller. Neither I nor my office can hold the due diligence fee or be responsible for getting the due diligence fee to the seller. 

Let’s look at an example

For our example, you write an offer on the 1st of the month and have the due diligence expiration date listed as 6pm on the 15th of that month with a $500 termination fee. 

I would recommend having all inspections done and any repair requests sent to the seller by the 10th of the month. Give the seller until 5:00 pm on the 12th to respond. You will know by the end of the day on the 12th if you are willing to move forward or want to terminate the contract. 

If you decide to terminate the contract, you need to mail your $500 termination fee to the seller and the seller must receive it by 6pm on the 15th. My recommendation is to send a certified check the next day to the seller and send it overnight through UPS or FedEx. This way, you have a tracking number and the check will get to the seller quicker. At the time of the contract, I will ask the listing agent for the seller’s address so we know where to send the termination fee. You also need to send the Notice of Termination form to the seller. I can have you sign that form electronically through DocuSign and send that to the listing agent. That form also needs to be received by the seller by 6pm on the due diligence expiration date. 

Let me know what questions you have about the due diligence period from the buyers’ perspective. You can also watch my video about due diligence from the sellers’ perspective. Are you ready to buy a home in Murrells Inlet or the surrounding area? Let’s schedule a time to talk and discuss your unique situation.