Contingency Clauses in Greenville Real Estate Offers: Protecting Your Interests

Making an offer on a home in Greenville is a significant moment. Whether you have found a historic property near the Reedy River, a family home with views of Paris Mountain, or a modern condo downtown, the excitement is tangible. That excitement often leads to a rush to sign the paperwork. However, the purchase agreement you sign is a binding legal contract, and buried within its pages are the clauses that can either protect your interests or expose you to serious financial risk. These are the contingency clauses.

What is a Real Estate Contingency Clause?

Think of a contingency clause as a safety hatch in your real estate offer. It is a condition or stipulation within the purchase agreement that must be met for the contract to become binding and move forward to closing. If a specified contingency is not met, the party who benefits from the clause (usually the buyer) has the legal right to terminate the contract without penalty.

More importantly, a properly written contingency protects your earnest money deposit. Earnest money is the good-faith deposit you make when signing the contract. Without contingencies, if you were to back out of the deal for any reason, the seller could be legally entitled to keep this deposit. With contingencies, if you terminate the contract because one of those conditions was not met, your deposit is returned to you.

The ‘Big Three’: Key Contingencies for Greenville Buyers

While a contract can have many different contingencies, nearly every residential purchase agreement in Greenville should include three primary protections.

The Home Inspection Contingency

This is perhaps the most well-known contingency. It gives the buyer the right to hire a professional home inspector to conduct a thorough review of the property.

What it covers: The inspector examines the home’s structure, roof, HVAC system, plumbing, electrical, and foundation.

How it works: The contingency provides a specific timeframe (e.g., 10-14 days) for the inspection to be completed and for the buyer to review the report.

The outcome: Based on the report, the buyer typically has three options:

• Proceed: If the issues are minor or the buyer is satisfied, they can proceed with the purchase.
• Negotiate: The buyer can present the report to the seller and request repairs or a credit toward closing costs.
• Terminate: If the inspector finds significant, undisclosed problems, the buyer can use the contingency to terminate the contract and have their earnest money returned.

The Appraisal Contingency

Lenders will not provide a mortgage for more than a home is worth. The appraisal contingency protects you from being locked into a purchase if the home’s value is less than the price you agreed to pay.

What it covers: The buyer’s mortgage lender will hire an independent appraiser to determine the property’s fair market value.

How it works: The contingency states that the property must appraise for at least the agreed-upon purchase price.

The outcome: If the appraisal comes in low (an “appraisal gap”), the buyer has options:

• Negotiate: The buyer can ask the seller to lower the price to match the appraised value.
• Cover the Gap: The buyer can pay the difference in cash (something lenders like to see).
• Terminate: The buyer can walk away from the deal with their earnest money.

The Financing Contingency (Mortgage Contingency)

This clause makes the purchase conditional on the buyer’s ability to secure a mortgage loan. This is vital even if you have a “pre-approval” letter. A pre-approval is not a final guarantee; a lender can deny the final loan application due to changes in your financial situation or issues with the property itself.

• What it covers: It protects the buyer if, despite their best efforts, they cannot obtain financing on the terms specified in the contract (e.g., a specific interest rate or loan type).
• How it works: The buyer must formally apply for a loan within a set time. If the loan is denied, the buyer must provide the seller with a denial letter from the lender.
• The outcome: If the buyer is denied financing, they can terminate the contract and recover their earnest money. Without this clause, the buyer would be in breach of contract and could lose their deposit.

Understanding the South Carolina ‘Due Diligence’ Period

In many real estate transactions in Greenville, you may not see separate contingencies for inspection, appraisal, and financing. Instead, these critical safeguards are often bundled into a single, powerful provision known as the Due Diligence Period. This comprehensive clause is a key feature of the South Carolina REALTORS (SCR) Form 310, which represents the most common and widely used purchase agreement in the local market.

What is the Due Diligence Period?

The due diligence period gives the buyer a set number of calendar days—a duration that is negotiated and agreed upon by both parties, typically ranging from 10, 14, or 21 days—to conduct all of their necessary investigations and assessments into the property and the overall transaction. This period is often described as the buyer’s “free look” because it provides them with a unilateral right to terminate the contract for any reason or no reason at all, provided they do so before the period expires.

During this finite timeframe, the buyer is expected and strongly encouraged to complete a thorough review and investigation, which includes, but is not limited to, the following critical actions:

• Conduct a full home inspection: Hiring a licensed professional to evaluate the physical condition of the property, including structural integrity, major systems (HVAC, plumbing, electrical), and potential defects.
• Get the property appraised: Ordering an appraisal to ensure the property’s value supports the purchase price, which is often a requirement for the buyer’s lender.
• Secure final loan approval: Working with their mortgage lender to obtain complete and final underwriting approval for the financing needed to close the sale.
• Review HOA documents: If the property is part of a Homeowners Association (HOA), the buyer must review the Covenants, Conditions, and Restrictions (CC&Rs), bylaws, and financial statements.
• Check zoning and property boundaries: Investigating local zoning regulations to confirm the intended use of the property is permissible and potentially ordering a survey to verify the exact boundary lines.
• Investigate the cost of homeowner’s insurance: Obtaining quotes for property and hazard insurance, as high premiums due to factors like flood risk can impact the buyer’s ability to afford the home.
• Do anything else related to the property’s suitability: This is a broad provision allowing the buyer to investigate any other factors—such as school districts, commute times, or environmental concerns—that are material to their decision to move forward with the purchase.

The Due Diligence Termination Right

This is the most important part: The South Carolina due diligence clause gives the buyer the unilateral right to terminate the contract for any reason, or for no reason at all, as long as they do so in writing before the period expires.

If you are within your due diligence period, you do not need to give the seller a reason. You can simply terminate and receive your earnest money back. This is a much broader protection than a simple inspection contingency, which requires a material defect to be found.

The Due Diligence Fee

In exchange for this powerful right, the seller may demand a “due diligence fee.” This is a non-refundable fee paid directly to the seller. If you close on the home, it is typically credited back to you. But if you terminate the contract—even for a good reason found during the inspection—the seller keeps this fee. It is the cost of holding the home off the market for you while you do your research.

Other Important Contingencies to Consider

Beyond the “Big Three” or a broad due diligence period, your situation may require more specific protections.

• Home Sale Contingency: This is for buyers who need to sell their current home to afford the new one. The contract is contingent on the successful sale and closing of their existing property. This is less common in a competitive seller’s market, as it adds significant uncertainty for the seller.
• Title Contingency: This clause gives the buyer’s attorney time to perform a title search. It ensures the property has a “clear title”—meaning the seller legally owns it and there are no outstanding liens, judgments, or claims against it.
• HOA/Condo Document Review: If you are buying in a community with a Homeowners Association (HOA), this contingency gives you a few days to review the rules, regulations, bylaws, and financial statements of the HOA. If you find rules you cannot live with (e.g., “no pets”) or see that the association is in poor financial health, you can back out.
• Insurance Contingency: This allows the buyer to terminate the contract if they cannot secure homeowner’s insurance for the property. This can be an issue for older homes in Greenville, properties in potential flood zones, or homes with a history of claims (e.g., for water damage or a bad roof).
• Septic and Well Inspection: For properties outside of Greenville’s main sewer and water systems, such as in rural parts of Greenville County, a contingency for a satisfactory septic system and well water test is essential.

The Serious Risks of Waiving Contingencies in a Competitive Market

In the recent competitive Greenville real estate market, some buyers have been tempted to “waive” contingencies to make their offers more attractive to sellers. This is an extremely high-risk strategy.

Waiving contingencies means you are telling the seller you will buy the home “as-is,” regardless of what the inspection uncovers, how it appraises, or whether your loan is approved.

• Risk 1: The Appraisal Gap: If you waive the appraisal contingency and the home appraises for $25,000 less than your offer, you are contractually obligated to bring that $25,000 to the closing table in cash.
• Risk 2: The Money Pit: If you waive the inspection contingency and the inspector later finds a $30,000 foundation problem or a $15,000 roof replacement is needed, that cost is now entirely your problem.
• Risk 3: Losing Your Deposit: If you waive the financing contingency and your lender denies your loan at the last minute, you will be in breach of contract. The seller will likely be entitled to keep your entire earnest money deposit, which could be thousands or tens of thousands of dollars.

Before waiving any protection, it is vital to discuss the full range of potential financial consequences with a knowledgeable real estate attorney.

How a Real Estate Attorney Protects Your Transaction

In South Carolina, a real estate attorney is required to be involved in the closing of any property. However, their role can and should begin much earlier. An attorney’s job is not to buy or sell the house, but to protect your legal and financial interests throughout the entire process.

An attorney can:

• Draft and Review the Offer: Before you sign, an attorney can review the purchase agreement (like the SCR Form 310) to ensure the contingencies are written to protect you.
• Negotiate on Your Behalf: After an inspection, an attorney can help you draft a formal repair request or negotiate a credit from the seller.
• Resolve Title Issues: The attorney conducts the title search. If issues are found, they work to resolve them so you can receive a clear and marketable title.
• Manage Contingency Deadlines: Missing a deadline by even one day can result in you losing your contingency rights. An attorney helps manage these important dates.
• Handle Disputes: If a disagreement arises over repairs or earnest money, your attorney is your advocate, prepared to defend your contractual rights.

Protecting Your Greenville Real Estate Transaction

A real estate purchase is one of the largest financial commitments most people will ever make. The difference between a smooth closing and a financial catastrophe often comes down to the strength of the contract. Contingency clauses are your single most important tool for managing risk in a real estate deal. The legal team at the DeBruin Law Firm is dedicated to protecting home buyers and sellers in Greenville and across South Carolina. We handle the legal details so you can focus on the excitement of your new home. If you are preparing to buy or sell a property and have questions about the purchase agreement, due diligence, or contingency clauses, please contact us.

We invite you to call us at (864) 982-5930 or send a message online to schedule a consultation to discuss your specific real estate needs.