Avery Carle [00:00:03]:
Hey guys, it’s your host, Avery Carle. Welcome to the short term show special episode series on Myrtle Beach, South Carolina. I’m super excited to do this 10 episode deep dive into this market with you and I wanted to make a few notes for you first. So if you want to set up a search for properties or see current purchase prices or current income numbers in this market, you can do that at our website, the shorttermshop.com. if you just want to connect with us and hang out and talk about short term rentals more, you could do that in our Facebook group. It’s the same title as my book. It’s called short term rental Long term wealth. And you can also find the information on all of our other market short term show special episode series there as well.

Avery Carle [00:00:41]:
So we look really forward to hanging out with you over the next 10 episodes and we’ll catch you guys on the next one. Let’s go foreign. Hey guys, welcome to another episode of the short term show special episode series on the Myrtle beach market. Really cool episode today. So today we’re going to talk about the contract process. So as investors, a lot of times we know exactly what we’re looking for in terms of the property, what we need it to make, the amenities we want it to have, the price range. But what we don’t always know when we’re buying in a new state is what is typical of the contracts and the contract profits process in that state. So we’re going to go over that today.

Avery Carle [00:01:25]:
So you guys don’t have any surprises if and when you decide to buy with Bradley in Myrtle Beach. So we’ll go ahead and introduce our panel here. So just introduce Bradley. We’ve got Bradley Klein. Bradley, people are familiar with you from previous episodes, but if you want to just reintroduce yourself really quick in case they’re jumping in a little bit late, that’d be great.

Bradley Klein [00:01:46]:
My name is Bradley Klein and I’m one of the two of the short term shop agents here in Myrtle Beach. Samantha is, of course the other agent. Of course. I’ll be taking care of all of our buyers and sellers needs in the local market.

Avery Carle [00:02:00]:
Thanks, Bradley. And we also have Justin Ferraro. Justin, will you introduce yourself to our audience really quick?

Justin Ferraro [00:02:06]:
I’m Justin Ferraro with Rivertown Property Inspections. We do about 2500 inspections a year and I’m happy to be on the show with you.

Avery Carle [00:02:16]:
Thank you so much. So we’re gonna. Guys, we’re gonna walk through the contract process as if I am a buyer Asking questions about what things are on the contract. Once we get to the inspection, then we’ll. We’ll have a bunch of questions for Justin, but we’ll start at the beginning. So, Bradley, I have found a property that I want to put an offer on and we are about to write that offer. So there’s some things on the contract, some terms that we need to talk about. So the first one is earnest money.

Avery Carle [00:02:45]:
So is earnest money the only dep that has to be made up front in South Carolina or are there others?

Bradley Klein [00:02:51]:
It’s the only deposit up front. It’s typically 1% of purchase price in our market. We. And that’s held by an attorney in most cases. Some brokerages will hold it, but obviously we’re not a brick and mortar brokerage or team, if you will, but we have, we’re an attorney closing state, not a title closing state. So the attorney will hold that and how much it is. Typically it is 1%, but that can be negotiated, of course, depending on how motivated the buyer is. And then you negotiate how long the buyer has to get it to the attorney.

Bradley Klein [00:03:28]:
For example, my preferred attorney, anything over $6,000 has to be wired, otherwise a check can be mailed directly to them and then they’ll hold it until closing. And then of course, it will go towards closing costs at the, at the funding table.

Avery Carle [00:03:43]:
Gotcha. So, excuse me. So we’re looking at 1% of purchase price, which is pretty typical across, across most markets and times that you would ever put down more than that would be. If you know there’s multiple offers on a property, you would typically put down more earnest money to show seriousness. And Bradley. So earnest money, it’s refundable, right? Or is it not refundable?

Bradley Klein [00:04:05]:
It depends on the contract. Of course. If the contract was to fall through due to a contingency of the contract, whether that be financing appraisal, the CL100, which is the termite inspection, then typically the buyer will get that earnest money back. Of course, there is a earnest money release document which does have to be agreed upon and signed by both the buyer and seller. But that is generally how. How it works. If, of course, the contract falls through outside the scope of the contract, then it does generally go to the seller. If we do, we’re a due diligence closing state.

Bradley Klein [00:04:44]:
So we also have a separate termination fee, which is kind of like a good faith money, if you will, that amount. There’s no set percentage per se. It’s generally negotiated on the contract. It is typically substantially lower than the earnest Money. And essentially, if you were to terminate the contract during the due diligence period, which of course is when you would do your inspection or any inspections that you would like, if for any reason you weren’t satisfied, you couldn’t come to an agreeance and you terminated the contract, then that termination fee would go to the seller, but it isn’t held by the attorney. Nothing is done with that amount until we get to that situation, if you will.

Avery Carle [00:05:28]:
Got it. So that. Yeah, that was my next question. So we’re going to. It’s refundable if you terminate under the contingencies of the contract, right?

Bradley Klein [00:05:37]:
Correct.

Avery Carle [00:05:38]:
Correct. So one thing that I want to make sure people understand, too, and we’ll get to this more in a minute when we talk about inspections, is, does the seller have to sign a release that says, okay, yes, I agree, this is terminated and we’re releasing the earnest money? Like, is, or is it automatic that the buyer just gets it back if you terminate?

Bradley Klein [00:05:57]:
They do have to both sign up.

Avery Carle [00:05:59]:
Yes. So that’s one thing that I wanted to touch on. Because, yes, if you terminate, like, if you go through your inspection and there’s a foundation problem and you don’t want to deal with that and you terminate, you are well within your contingencies. But if the seller wants to be difficult and push back and not sign that earnest money release, even though you are following the contract, they can do that. So what I don’t like to see people doing is putting their earnest money at risk by, like, trying to get really cute about terminations. Like, and what I mean by that is maybe you can qualify for buying one property, but you get under contract on 10 and you want to try and beat everybody up really hard on the inspection to see who will give you the best deal and then only close on the best deal and terminate on all the rest of them, that can get you in trouble. And if a seller feels like you’re not acting in good faith or they get kind of mad, they can push back on that. And if they do, typically, and Bradley, correct me if this is different for your state, that the only person who can ultimately decide if it were to go that far, which I’ve never seen it go this far, is a, is a judge.

Avery Carle [00:07:02]:
So even if you fall, it is okay. So even if you fall under that contingency, you’re doing everything right. If the seller just wants to be a jerk and not sign it and push it that far, they can. Now, typically, what happens is the seller doesn’t. The seller will Be mad for a few days. Then they’ll realize, like, okay, I don’t want to tie this property up over this. I want to get it back on the market. They’ll sign it and release the earnest money and move on.

Avery Carle [00:07:25]:
I’ve never, ever seen it go to what’s called an interpleeter, but it could. So I just wanted to let you guys know to make sure that you. You do take earnest money seriously so you don’t lose it or put it at any kind of a risk.

Bradley Klein [00:07:38]:
Yeah. And the biggest importance is actually sending it on time. A lot of. A lot of times people see these contract dates as just tentative dates. They don’t realize they’re actually strict. Strict dates that have to be stuck by. And they’ll just send the earnest money. They’ll wait till the inspection because they don’t want to send it.

Bradley Klein [00:07:56]:
But they have to understand they’re in breach of contract if they don’t send it by that deadline.

Avery Carle [00:08:01]:
Gotcha. And what is the typical deadline for that?

Bradley Klein [00:08:05]:
Again, it’s negotiated, but generally it’s a week, depending if there’s any holidays or anything. But generally five business days is plenty of time.

Avery Carle [00:08:13]:
Okay, gotcha. So whatever the contract says, but typically it’s like five business days.

Bradley Klein [00:08:20]:
Yeah.

Avery Carle [00:08:20]:
Okay, so let’s move on to some other terms of the contract. So some other things that we need to work out and have on this contract. One of them is furniture. So this. In this market, a lot of stuff comes furnished, right?

Bradley Klein [00:08:32]:
Yes. Still to be stated in the MLS if it’s furnished or not, generally there isn’t anything in the contract per se. But we would have a separate. Because typically, if it’s included, of course, you want to make sure you’re protected. Most lenders don’t like to see it on the contract. So we’ll do a separate bill of sale for a consideration of a dollar per se. That way it’s all contractually binding.

Avery Carle [00:08:55]:
Okay, guys. So what Bradley means by that is when a property comes furnished, so furniture is considered personal property and not real estate, it has to go on a separate document, not the. The contract that you’re buying the house with, especially if you’re getting a loan, because the lender can only lend on real estate, not personal property. So if a property is coming furnished and the furniture is listed on the real estate contract, a lender can’t determine, okay, how much of this purchase price is real estate and how much of it is personal property, and they can’t lend on personal property. So even if you say oh, well, 10,000 of this $500,000 is furniture. They can’t lend on that, so you just have to remove all of it because it will get caught up in underwriting, it will mess you up. So typically some states do have a line that says, here are all the items that come with the property at no additional value. And they do it that way.

Avery Carle [00:09:51]:
But in a lot of states like this, we have to put it on a separate furniture bill of sale so it’s not part of the real estate contract. But then you do have a contract for that furniture, typically it’ll be for a dollar. Every now and then you run into sellers in markets like this who want to try and make money back off of their furniture. Not often. And to that, I mean, if it’s me, and I know it’s an out of state seller who has this property that they want an additional 25, 30,000 for their used furniture, I’ll just say I don’t want any of the furniture. Because what’s going to happen is they’re going to get closer to the end of the deal and realize it’s a much bigger pain to come get furniture. And then what do you do with all this furniture? Sell it. Do you like, is it, is it going on Craigslist? And they realize, oh, if this person doesn’t take the furniture, it’s going to be really annoying for me and they’ll just give it to you or at least give you like a really big discount compared to what they were trying to charge you.

Avery Carle [00:10:44]:
So that doesn’t work every time. That’s my strategy. When they try to try to get you for the furniture, say, well, I just don’t want any of it, come get it. And then they’re like, oh, wait a minute, I don’t want to do that. So doesn’t work every time. Okay, so we talked about furniture, so let’s talk about disclosures. Bradley. So in some states, the disclosures on a, an investment property or a vacation home that someone doesn’t live in are different than if they’ve been living in the home.

Avery Carle [00:11:12]:
So do in South Carolina, do sellers have to disclose everything that they possibly know?

Bradley Klein [00:11:20]:
So they, they do. And it is of course, everything they know. Since owning the property, which is the seller’s property disclosure, they do just have to disclose if it is a primary residence, whether it’s a vacation property, and then of course, if it is a vacation property, we have the South Carolina Vacations Rental act, which in layman’s terms, I mean, if you look at the document and a lot of brokerages have their own versions of it. But in layman’s terms it basically states that this property is a vacation rental property and it is subject to the 90 days notice upon closing. So you have to give the property manager 90 days notice and all rentals within that 90 days do have to be honored before you can terminate the contract. Of course a lot of these condos for example, where they’re in, if you have a one bedroom condo where there’s three other one but 300 other one bedroom condos, a lot of the times they’ll reallocate, reallocate bookings because a lot of the time they operate like hotels and they won’t book until a week or two out anyway. So in some cases they’re pretty lenient with working with the buyer to try and get rid of as many as possible because in most cases the buyer doesn’t want to stick with the property manager because of course they make less money and then the, the property manager takes a bigger chunk of the, of the, of the revenue. So they want to get away from that as soon as possible.

Bradley Klein [00:12:55]:
But prop single family homes are a lot trickier just because there aren’t as many of them and it’s harder to relocate people. So usually with single family homes they do have to honor them.

Avery Carle [00:13:06]:
Okay. And that it’s not, that rule does not apply for every single state. So that’s a really good call out that they do have to honor it. So when you say honoring for 90 days, who obviously the property manager is taking their split on, on that 90 days. But who gets paid? The owner split. Me as the new owner or the.

Bradley Klein [00:13:26]:
Previous owner, you as the new owner.

Avery Carle [00:13:28]:
Okay, good, good call out. So guys, keep that in mind especially if you’re buying to cost seg in this market. If you’re buying towards the end of the year then and you have to have that material participation where you have worked more on or in this property than any other person. Keep that in mind because when you’re offering on properties that the 90 day honoring period because it would be really difficult if you do have to honor 90 days worth of bookings, it will be difficult to show that you put more work in or more hours in than the property manager during that time. So definitely try to negotiate that out of the contract or you know, find, find a property that will because that, that will mess up your cost seg. I’m definitely. It’s not tax advice, just best practices here. So definitely consult a CPA or a Cost segregation expert on that.

Avery Carle [00:14:21]:
But it’s something to keep in mind when you are making offers. Okay, so let’s talk about the contingencies of the contract. So contingency means the reason you can terminate and get your earnest money back. So what are the, what are the contingencies of the contract in South Carolina, Bradley?

Bradley Klein [00:14:40]:
So the first contingency of the contract is the terms of purchase. So whether you’re buying financed, which of course, if you’re buying finance, that’s going to be your contingency. Essentially if the financing falls through, then you can terminate due to inability to obtain financing. We have separate to finance finance, we do have the appraisal contingency. So essentially, if everything runs smooth with your finance, but the property doesn’t appraise and the buyer and seller can’t negotiate the terms. So let’s say you’re buying a $400,000 property, it appraises for 350 and the seller isn’t willing to drop the price to the appraised value. The buyer is willing to come up with the difference or they can’t negotiate an in between figure. Then of course the buyer can terminate due to the, due to that contingency, the due diligence period, which is, it’s kind of separate to a contingency.

Bradley Klein [00:15:45]:
But essentially you have the negotiated amount of time, which in our market, depending on the property and obviously the season, of course in the summer it would be slightly longer, but generally it’s 10 to 14 days. And then that gives the buyer enough time to call up the inspection inspector to get an inspector out there and then kind of go over the report. Which Rivertown are awesome because they have a same day report. A lot of these inspectors take one to two days. Rivertown always have a same day return on the inspection report. Then of course you have to negotiate the repairs. But within that time, of course, technically you can terminate the contract within the due diligence period for any reason whatsoever and just pay that termination fee. But that’s the area where the contract generally tends to.

Bradley Klein [00:16:38]:
If it is going to terminate, it generally tends to be because of that reason. Then we have the CL100, which is essentially a termite inspection. Of course, we live at the beach. We. It happens. A lot of these older structures, they do, they do have, they do have termites. And it’s nice to have that separate protection to know that, okay, your inspector is going to do this, but you can pay 80 bucks for just for a termite inspection and the inspection for the property May come back clean as a whistle. But of course, if you’ve got termites, then it’s nice to know that you are protected by that contingency also.

Avery Carle [00:17:21]:
Awesome. So let’s start with the finance, I mean, not the financing. Let’s start with the inspection contingency. And we’ll, we’ll switch over to Justin for just a second, who’s been waiting really patiently. So, Justin, let’s talk about, about inspections here. So what is first, let’s talk about what is covered in a typical home inspection. So let’s say I’m buying something single family in Myrtle beach, and I hire you guys to do an inspection. What are you guys looking at?

Justin Ferraro [00:17:51]:
So we’re looking at pretty much everything on the home. Each home or the average home home inspector is inspecting over 500 items. So that’s a lot of items to take a look at. Now, some of them are maintenance or cosmetic. And as a home inspector in the state of South Carolina, we follow the state standards practice, which are either issued by Ashy or internachi. And on that standards practice is kind of like a guideline on what you’re inspecting. So the main items are, would say, you know, the roof, the H vac system, your electrical, your plumbing, the foundation of a home and the exterior of the home are like the main portions of what you’re looking for. And the most expensive repairs on a home.

Justin Ferraro [00:18:40]:
When it comes to a roof, you know, that’s something you need to check with your inspector. You know, if they’re going to walk the roof. There’s many inspectors that don’t walk the roof because it’s not a requirement by those standards of practice. And same with the home inspector, a crawl space, like in the foundation, that’s something you need to check with your inspector as well, because many don’t go under there because it’s not a requirement.

Avery Carle [00:19:01]:
Okay, so it’s. You definitely want to ask those two questions of an inspector. Hey, do you look at the roof? Do you look at the crawl space? Because that’s not a requirement.

Justin Ferraro [00:19:09]:
Correct. And those are two of the most expensive repairs on a home.

Avery Carle [00:19:13]:
Oh, that’s a very, very good call out. Because in other states that I know that I work in, often they are included. That’s totally standard. So definitely a really good call out there. So in terms of interior, you can’t look. You’re not opening up any walls. You’re not moving things around. It is just what you can see.

Avery Carle [00:19:31]:
You’re checking obviously, all of the electrical outlets, light switches, gfcis, Making sure everything’s working and is in good repair. But you are not opening up walls or things like that.

Justin Ferraro [00:19:44]:
Correct. For the most part. Now, our standards of practice only state that we only have to check a handful of windows and electrical outlets. So let’s say one window per room, one electrical outlet per room. And some people consider that as an inspection. So it’s important that your inspector goes above and beyond and test them all. Now it’s very important for somebody to do a buyer to conduct a final walkthrough inspection because a home inspector will not move furniture, won’t, you know, lift rugs, you know, that sort of thing, to get to electrical outlets or something that may be hidden, you know, behind some, some sort of furniture.

Avery Carle [00:20:21]:
Gotcha. So guys, keep that in mind. And I think some people will be like, oh my God, the light switch is crooked. The entire electrical must be really messed up. But you know, they, they think that if one thing is messed up that everything is falling apart. And that’s not necessarily the case. So guys, it’s also really important to make sure that you are communicating with your home inspector. So we see buyers all the time that’ll say, oh, I don’t care who the home inspector is, just schedule who you normally use and we’ll look at the report.

Avery Carle [00:20:52]:
And they never speak to the home inspector. So we don’t let people do that. We, we will give you guys a list of, you know, a couple good ones that we know. But it is your job to call the home inspectors, make sure that you understand what’s covered in a home inspection, that you like this person, that this is the person that you want your inspection and, and hire them yourself. But the biggest piece of the communication that I think people miss is once they get the home inspection back, is calling the home inspector and saying, hey, what’s this, this and this. Asking all the questions that they need to know to understand what that home inspection says. Because all home inspections are going to be like 10 pages. I have seen we had a brand new construction in another market one time that we were the listing agents and it was 27 bedrooms and it was brand new construction.

Avery Carle [00:21:37]:
But of course it was like a 30 page inspection of not things that were done wrong or anything, but you know, just like, oh, they need to straighten this up. There was a pencil line here, you know, things like that. And the buyer who was not our client came back to us and said, this is a 40 page inspection on a brand new construction. We want $200,000 off because there’s a 40 page inspection. There’s no such thing as a clean inspection. These people were expecting to get a zero page inspection, which does not exist. So there’s no such thing as a clean home inspection. Even on brand new construction, there’s always going to be stuff that’s called out.

Avery Carle [00:22:14]:
But what kinds of things do you think? Or actually, let me back up. So it’s really important to call your home inspector and say, hey, what are these things? Can you explain these things? Because that’s their job, is to help you understand what, you know, what’s going on with the house.

Justin Ferraro [00:22:27]:
Yeah, we, so we love communicating with the clients and the agents. You know, the ultimate goal for an agent is get it to, you know, the closing table. And they have a team that they work with and it should be everybody’s, you know, job on each team to make that happen. Now by doing that is through communication and helping, you know, the clients, you know, with whatever questions that they may have. For us, I mean, we’ve got six inspectors. So, you know, we ask people to call into the office, the office sends it to the inspector because if each inspector gets multiple phone calls throughout the day, they’re going to be missing items. On a home inspection, they’ve got to be able to focus. But we, we like it when people show up for the last 30 minutes of the inspection so that each inspector can walk that person through that home and, you know, go cover the items that were found.

Justin Ferraro [00:23:22]:
Because sometimes people misconstrue the verbiage in the report and think something that is a bigger deal than it actually is.

Avery Carle [00:23:30]:
Yeah. And I mean, that can go both ways. You can look at something and not think it’s a big deal and it actually is a big deal. Or you can look at something and think, oh my gosh, this is a huge deal and it’s really not. So always, always just give your home inspector a call. I know a lot of us millennials are investing right now and we don’t like to get on the phone and we have to overcome that, make that phone call and ask some questions. But what are some things that you see speaking of that that are really common that are going to be on like most inspection reports in this market?

Justin Ferraro [00:24:03]:
I would say disintegrating fence on the outside unit of the H VAC system. And what that the reason being is because we live in the ocean, you know, there is salt in the air. So it actually disintegrates the fence quicker than, you know, the average unit in Tennessee or something like that. One A big one around here is actually microbial growth. You know, we have high humidity here, low wetland, so microbial growth is something that we find all over the place. I mean, we breathe it in every single day. People are moving from Arizona don’t understand that, you know, so that’s important to disclose and, and explain to them that, hey, this is your, you know, everyday microbial growth. This is not, you know, huge issue.

Justin Ferraro [00:24:54]:
We do, you know, recommend having it taken care of, but many times it’s just, you know, getting a chemical and wiping it down.

Avery Carle [00:25:01]:
Yeah, I’ve seen that a couple of times too, where they’re like, oh my God, there’s some mold. And then people are like, oh my God, it’s black mold. But it’s really not, it’s just like not a big deal. So you definitely want to get those kinds of things checked out. But just because one exists doesn’t mean that the other necessarily does. What do you, what would you say are some other things besides microbial growth that you might see on a lot of these properties? So I think, you know, I don’t know how much. Is there a ton of new construction, Bradley, in Myrtle beach, or is it mostly like mid 2000s at this point?

Bradley Klein [00:25:31]:
There’s a lot of new construction, but it’s generally not short term rental friendly. So it’s not very often that I deal with new construction for, for, for our clients.

Avery Carle [00:25:43]:
Gotcha. So you’re typically going to be dealing with at a, at a minimum 2000s builds. Like mid 2000s.

Bradley Klein [00:25:50]:
Yeah, yeah. And I mean in North Myrtle Beach, I mean, some of them are, for example, one listing I have right now was built in 1956. So there are some older homes here also.

Avery Carle [00:26:02]:
Yeah. So it’s important to understand again that when you’re buying these types of properties in these types of markets, especially if they’ve been rentals, you know, it’s not a situation where people have been living there and maybe updating over time. They’ve just been kind of a lot. At least I found in markets like this that have been short term rental markets for a long time, if they’re getting asses in the seats, they are not really doing updates, especially if they’re on these big local property management companies. I’ve seen some, some deferred maintenance get, you know, they let it get further than they typically would if they were self managing and you know, getting these reviews and complaints directly to them if there’s anything wrong with it or actually living there. So what, I guess what I’m trying To say is if a property’s got some dings and some dents and some things to, to fix, maybe you know, not necessarily a brand new roof and the foundation’s messed up and all these other things, but any, any property in these types of markets is, it’s a used property, it’s going to have been a vacation rental, it’s gonna have some deferred maintenance and some scratch and dent stuff going on with. Is that fair to say?

Justin Ferraro [00:27:05]:
It is. And you know, one of the things that we have to keep in mind in our area, for many years, the entire town shut down during winter. So, you know, majority of the homes that were here were all second homes. So when it comes to deferred maintenance, the only time maintenance really took place is whenever people came in and, you know, vacationed in their own home.

Avery Carle [00:27:28]:
Right. So I guess what I’m getting at here is I, I wouldn’t be out here in search of the best inspection report, but the best opportunity for the highest income producing property, whether you have to make some repairs or some updates, period. We’re looking more for location opportunity. You know, you can always fix decor and photos and deferred maintenance, but you can’t, you know, put a view of the ocean in a property that doesn’t have a view of the ocean. You could fix up a property, but you can’t create a view. So, or location, you know, insert thing here. But thank you, Justin. I think that’s all my questions surrounding inspections.

Avery Carle [00:28:09]:
So, Bradley, let’s talk about the appraisal contingency for a minute, then we’ll move on to financing. So if the property appraises low, what are my options?

Bradley Klein [00:28:19]:
So either the seller has to drop the price to the appraised value. The buyer has to. If the seller disagrees, the buyer has to essentially come out of pocket up to the, the difference between the appraised value and the purchase price. Because of course, the loan is the lenders only going to lend on the appraised value. They won’t lend higher than that. So as I said, for example, if you buy a $400,000 property, it appraises for 350. The seller isn’t willing to come down. You have to come out of pocket 50,000, you can negotiate.

Bradley Klein [00:28:58]:
So seller drops the price a little bit, you come out of pocket a little bit, which generally tends to be the most common outcome. I don’t see many appraisals not come in, to be honest. I think one good thing in our market is most properties do generally tend to Be priced. Well, I think since I’ve been doing real estate, I’ve maybe had two that did come in low. One of them was an appraisal error. So it was just. They did a reappraisal, reevaluation, and they came with, came up with the correct number. Second time we were able to negotiate, but.

Bradley Klein [00:29:29]:
And then finally, if we can’t come to an agreement, then of course you terminate the contract and generally the buyer does get back their earnest money.

Avery Carle [00:29:37]:
Okay, gotcha. So four scenarios. Seller can come down to appraised value, or buyer can come up to the contract price, which will be cash out of pocket. It won’t be financed. So if you appraise 10,000 under, you’ve got to come with an extra 10,000 cash to closing. Three, we meet somewhere in the middle, or four, we terminate the contract and move on.

Bradley Klein [00:29:58]:
Yes.

Avery Carle [00:29:58]:
Okay. Pretty straightforward. Now let’s talk about the financing contingency. So if for some reason we are not able to qualify for financing, we can terminate and get our earnest money back. Is there any kind of time limit on the contractor timeline to where that can happen? Like, can that happen the day before closing? Like, you know, the lender goes back and does their final thing and says, oh, wait, sorry, we missed something or they lost their job or something?

Bradley Klein [00:30:23]:
Yes. And it happens a lot with oceanfront condos because of course, the rules with the. And I’m, I’m not a lender, so I’m not going to speak as a lender, but of course, the rules change all the times. So sometimes some of these oceanfront buildings that were extremely easy to obtain financing, now they want to get the. For example, this is a big one that happens recently is they want to get the primary versus secondary versus investment ownership numbers. The condo. The HOA doesn’t keep record of it. It doesn’t pass.

Bradley Klein [00:30:59]:
So it doesn’t get financing, which. That generally happens within the final week of closing. So the finance contingency, you are protected essentially from beginning to end.

Avery Carle [00:31:10]:
Gotcha. Okay. Because I know in some markets it has to be by a certain date, like, you know, three weeks after the contract date. And if something happens after that, then you lose your earnest money, but that’s good. So you’re protected up until the time of closing. If anything crazy happens, like you lose your job, now you can’t qualify. We. We’re not adding insult to injury there.

Avery Carle [00:31:33]:
Cool. So let’s see. So let’s say we’ve made it. Made it through. We’ve gotten through our inspection contingency Maybe we’ve gotten a few bucks knocked off, it’s appraised, our financing looks good. So now we’re getting to the closing. So there’s one other thing that will happen before the closing happens, and that is your final walk through or final inspection, depending on where you are. It’s called different things.

Avery Carle [00:31:56]:
So what that is is the opportunity for you as a buyer to walk through and make sure that the property is in the same or better condition than it was when you first got it under contract or when it was inspected. What it is not is actually a second inspection where you can try to find as many things wrong with it as you can and get a last minute discount. That’s not what it is. It’s just to make sure that everything is the same. And there’s two people who can do this for you. You, the buyer or the home inspector who did the initial home inspection. Typically they’ll charge another fee to come out and just make sure that either the repairs were done or that, you know, everything is, is the same. There’s one person that it can’t be, and that is your, your agent.

Avery Carle [00:32:40]:
And here’s why. And I’ll tell a story of, you know, when I’ve made mistakes doing this before. So agents are not trained or licensed in looking at any sort of repairs or being able to comment on the condition of a house, whether it requires repairs or not. We can’t comment on that because we’re not licensed. You know, we’re not home inspectors, we’re not contractors. So where it can get hairy is now I’ve had my fair share of buyers say, oh, well, my agent in Ohio did the walkthrough for me. Well, your agent Ohio put themselves at some significant liability by doing that. So here’s, here’s an example of where I’ve made a mistake before.

Avery Carle [00:33:16]:
I did a final walkthrough for a buyer, you know, just did a quick video, looked around, everything looked great, look good to me, we close, move on. Three weeks later, this buyer calls me livid, wants to come after me because there’s some squishy subfloor around one of the toilets that the inspector missed. And then I missed it because I don’t even, I don’t even know that’s something to look for. Squishy floors. I didn’t know floors could be squishy. And I did not even go, you know, I didn’t, I didn’t use the bathroom there, so I didn’t see it. And then now it’s, you know, on me because I missed that in the final walkthrough. So it really does need to be you as a buyer or that home inspector to just make sure everybody’s on the same page.

Avery Carle [00:33:53]:
I’ve also seen it happen to where one of our agents did a walkthrough for somebody and a piece of art was missing that apparently the buyer really wanted and was excited about. And we didn’t notice that. And then. So there’s just too many opportunities for things to go wrong. So if you can, you are the best person to do your final walkthrough. A second option would be your home inspector. And I don’t know if either of you guys have any comments on that, but that’s kind of my, my take on it.

Justin Ferraro [00:34:19]:
I think it’s very important we actually offer a service with a thermal camera where you can walk through, especially during the inspection or final walk through, just to make sure that nothing’s actually leaking, you know, inside of the walls or the ductwork isn’t loose and it’s the client’s, you know, last opportunity to set, you know, get in there and get eyes on for themselves.

Avery Carle [00:34:39]:
Yep, totally, totally agree with that. So I think that’s the biggest thing there. And Bradley, this is where we’re going to need some more of your help. So we’re getting to the closing date and it’s time to close on the property. So if I’m a buyer, do I get the keys to the property at the time that I sign or at the time that the money funds into the seller’s account?

Bradley Klein [00:34:59]:
Money funds, it can be agreed upon. And if the, if this, for example, if there is any kind of delay or if it’s Friday afternoon and the funds are not going to disperse until Monday, for example, which does happen a lot, of course, with finance deals, especially with a lot of clients that do mail away closings. If you have a closing on a Friday, of course they do have to sign on the day of the loan. So typically funds don’t. The packet doesn’t generally arrive to the attorney until Monday, sometimes Tuesday. So in some cases, if, for example, the buyer wants to come to town, they’re eager to get inside and everything’s pretty much a done deal. Sometimes the sellers will agree for like early occupancy. But technically speaking, you don’t get the keys until the funds have gone to the seller.

Avery Carle [00:35:49]:
And how long does that usually take? Like a day.

Bradley Klein [00:35:51]:
It’s usually the same day if you close in the morning and everything’s in, in place and everybody’s done what they should do. It can, it can be a matter of hours. We record everything is done digitally now so they don’t have to have a courier run down to the, to the courthouse and record. They do it all digitally. So typically once everything’s done and they record, it can usually happen in a couple of hours.

Avery Carle [00:36:16]:
Okay, awesome. So where I don’t want you guys to get tripped up is coming into town and closing at like 3 or 4pm on a Friday and then something happens and it doesn’t fund and then you’re stuck with nowhere to stay until Monday. So try to time that at least. Yeah, I’ve seen it happen. Oh my gosh, I’ve seen it happen where people have a truckload full of furniture with them coming in from out of town. So try to time at the very least that closing to be first thing in the morning if you have to close on a Friday. But definitely keep bear in mind that you don’t get the keys when you sign. You get the keys when it funds and time that appropriately.

Avery Carle [00:36:53]:
Bradley, anything else related to the contract process in the Myrtle beach market that we haven’t covered that you think our listeners would benefit from hearing about?

Bradley Klein [00:37:01]:
One point I do just want to touch on with the, with the inspection stage. So of course Justin did mention, of course you can, if there’s mold, you can have extra, I guess, inspections done, but some of them are not included in the general inspection. So for example, if you want to do an air quality test, you would pay an extra amount for that. If you want to have the sewage lines inspected, you pay an additional amount for that. It’s not everything’s not included in the, in the general inspection. And yes, I can’t stress enough to call the inspector after because sometimes you look at the inspection and you, the buyer will freak out. But ultimately it may not be a huge deal. So always call the inspector to have just to go over it with you because they can sometimes look scarier than they actually are.

Avery Carle [00:37:51]:
Really, really good advice. Well, guys, if you are ready to start buying in the Myrtle beach market with one of our agents there, including Bradley, you can email us@agentshortermshop.com and we’ll get you connected. Or if you just want to hang out, learn some quite ready to do that yet. You can join our Facebook group. It’s the same title as my book right behind me. It’s called Short Term Rental, Long Term wealth. And we also have a live Q and A every Thursday that you can join if you just have questions about short term rentals. You can ask them to us there.

Avery Carle [00:38:19]:
Almost lost my train of thought. And you can join that@strquestions.com thanks guys. Sam.