Many real estate attorneys, including Law Firm Carolinas, PA, work in North and South Carolina to handle matters in both states to benefit their clients’ best interests, but require competence in the laws of both states. There are many differences in the laws of each state, so your counsel must have requisite knowledge of both in order to handle these types of engagements for you effectively. One area of difference between North and South Carolina is how earnest money deposits made in connection with an accepted offer to purchase are treated once the contract terminates due to default.
In North Carolina, by and large, there is one North Carolina Real Estate Commission approved contract form that is almost always used when licensed real estate agents are involved. Within the last couple of years, the form has been reviewed and revised to address this issue directly, most likely in an effort to keep the issues of speculative damages off a court’s docket as much as possible. For a defaulting buyer in NC, the earnest money deposit, along with any prepaid due diligence fee, is treated as the sole and exclusive remedy for breach. It is to be compensatory (i.e., an estimate of actual loss) and not punitive though, in the mind of a non-defaulting party in this type of situation, punitive damages would likely seem reasonable as well. This would be the case, particularly if you have incurred significant expenses, including moving costs, and then, for example, your buyer defaults the morning of closing. It doesn’t necessarily seem fair, but the terms of the contract make it clear on the issue.
South Carolina is a different as to this issue in a few ways. Firstly, there isn’t a prevailing contract form that is used all over the state as there is in North Carolina. There are more than a handful in use, so reviewing and understanding the one being used in your transaction is very important. For the purposes of this posting, the SCR Form 330 (a fairly commonly used SC residential contract form) allows for pursuit of any remedies to non-defaulting party at law or equity. This means the breaching party can be pursued more liberally than in North Carolina where the terms limit what can be done. There are pros and cons to this approach but it definitely gives the non-breaching party more ammunition at the time of default (or prospective default) in South Carolina.
The above details are important to keep in mind when proposing or accepting an offer in North or South Carolina because your remedies (what you will be entitled to pursuing in the event of default) will be defined at contract signing. Local custom, in many cases, directs what amount of earnest money is reasonable, but if it is too low it may not cover your out of pocket moving expenses effectively in the event of breach.
If you have any questions or concerns about your residential purchase contract in North or South Carolina in regards to a prospective or upcoming transaction, contact an attorney at Law Firm Carolinas to assist you.