After decades, Hilton Head is ditching its own real estate sales contract. Here’s why

Have you ever signed a contract on a house, then immediately had buyers remorse? A change is coming on Hilton Head that may make it easier to get out of that contract.

Hilton Head Area Realtors will end its use of a separate Hilton Head sales contract that’s been around for more than 20 years and adopt the South Carolina Association of Realtors contract. HHAR is a trade association for real estate agents in the Lowcountry.

This will make it easier for buyers to get out of their contract during the home inspection period — even if it’s for something as simple as not liking the wall color. On the other hand, it also holds the buyer accountable for a termination fee should they back out.

“[It’s] a little bit more freedom, for both parties, really,” according to board attorney John Carroll.

The vote earlier this year by the HHAR board of directors followed months of meetings soliciting feedback from local brokers, agents, closing attorneys and mortgage lenders, according Carroll. HHAR is currently in a transition period and the new contract will begin exclusively July 31.

The sales contract is a legally binding agreement between a buyer and seller that governs the sale of a property. It determines what conditions must be met to close the sale and transfer property ownership. Realtors aren’t legally required to use the new contract, almost anything could serve as a contract, but often brokerages will mandate use of the local Realtor association-supported contract.

Hilton Head real estate has nuances such as gated communities, transfer fees and property owners association fees that differentiate it from the rest of South Carolina real estate, which made the state contract not always workable in Hilton Head, according to HHAR CEO Jean Beck.

“The state contract has evolved over time where now it can be used in our market,” Beck said.

Overall, the state contract is less ambiguous than the Hilton Head contract. Aside from the state contract being over 10 sections longer, there are multiple differences between the two, particularity in how buyers can withdraw from a sale. It more explicitly defines terms, even down to exact times when some tasks must be completed. The switch will also make it easier for real estate agents to amend their contracts.

The change in contracts shows how vital it is that prospective buyers and sellers recognize the sales contract they’re signing as a step toward purchasing or selling their home. Whether buyers or sellers are using a real estate agent or not, they should understand the agreements being made.

For real estate agents, this means taking the time to learn a new contract or risk mediating a sale that they — and in turn their clients — don’t fully understand.

“I’d say the vast majority of local associations throughout the country use a state adopted contract instead of having their own unique local contract,” Carroll said.

Difference between the two contracts

Do real estate agents have to switch? The short answer is no.

“A Realtor could write a contract on a napkin,” said Carroll, the HHAR attorney and partner at Hilton Head law firm Burr & Forman.

However, many insurance agencies will only provide a certain level of errors and omissions to brokerages if their real estate agents continue to use the local Realtor’s association contract, according to Carroll. This leads to many brokerages mandating their agents to switch from the Hilton Head Island sale contract to South Carolina’s contract.

Re/MAX is one of the brokerages requiring the change. If real estate agents at RE/MAX make an offer using the Hilton Head contract after July 31, they won’t get their commission check, according to Director of Operations Kim Ciuffreda.

That’s because the real estate agents who use the Hilton Head Island contract after the switchover date risk copyright infringement because they no longer have permission from the HHAR to use it, said Ciuffreda, who has over 20 years of real estate experience, including 10 in Beaufort County. Another is for insurance reasons.

Regardless of the HHAR shifting what contract they support, a real estate agent is still required by state law to present any offer to their client, usually the seller.

It’s up to the client then to make a decision, even though a real estate agent can advise against using the outdated form and instead have a new contract written up. If the client decides to sign an outdated form, the brokerage will still process it, according to Ciuffreda.

“We can always counter offer on the state contracts, but the law states that you have to present the contract and your seller has to make the decision,” she said.

Carroll, the attorney, said it’s a change that allows both parties more freedom.

“For example, a buyer can say I want the carpet changed to be the color pink instead of color gray, and if you don’t do that I’m walking out on the deal,” he said. “And seller can either agree to that or not agree to that.”

Under the Hilton Head Island contract, the buyer wouldn’t be able to make those requests in the first place, according to Carroll.

It will be easier to get out of a contract

Compared with the Hilton Head Island contract, the South Carolina contract allows buyers to terminate the contract during the due-diligence period, sometimes called the “inspection period,” for any reason, not just if the seller refuses to make repairs.

After a sales contract is signed, the buyer is given a due-diligence period to get an appraisal, run a title search, perform property inspections or anything else to ensure the buyer is getting what they’re paying for and a bank is comfortable funding the purchase. Depending on how the contract is negotiated, this period can be anywhere from a couple days, a couple of weeks or no time at all.

In the Hilton Head contract there isn’t a fee to terminate, but the buyer is restricted to only terminating if repairs need to be made to specified aspects of the house, and if the seller is unable to pay for or make the repairs.

The South Carolina contract also has a designated space to determine a “termination fee” that the buyer would have to pay if they exit the contract during the due diligence period.

However, if the seller declined to make repairs, as they’re obligated to do under the contract, the buyer wouldn’t have to pay that fee.

In a way, the termination fee “holds the buyer’s feet to the fire” in the deal, according to Carroll.

Under state law, all real estate agreements are required to be in writing and signed. However, the South Carolina contract explicitly states that buyers and sellers are signing solely based on what is written the contract, not based on what a real estate agent might have previously said.

This offers more protection to the real estate agent. It also stresses the importance of ensuring everything is written, agents said.