What is a CL-100?

I’m often asked by buyers and sellers alike – “what is a CL-100?” When it comes time to buy or sell your home, this is an item many forget which eventually costs time, money, and sometimes, the transaction to fall apart. As beautiful as our home state of South Carolina is, our humid climate makes for a perfect breeding ground for our least favorite insects – termites. “CL” stands for “clear letter,” indicating there are no current termite infestations in your home. However, not that an inspector will not stop there.

What is the Inspector looking for?

There are a few factors inspectors will look for including signs of termites, carpenter ants, carpenter bees, wood-destroying beetles, and wood-decay fungi. The concentration of these wood-damaging forces in the Lowcountry are very high due to our hot and humid climate. In addition, the majority of structures in our area are constructed with white pine, a delicacy for termites. The inspector will check for wood rot (which is most often occurring in a Lowcountry’s crawl space), high moisture content in the wood structure, and other evidence of termite presence and damaged wood.
Additionally, the inspector will look for…

  • Visible evidence of active, or previous infestation of termites or other wood-destroying insects
  • Visible evidence of whether there has been prior termite treatment
  • If there is evidence of active wood-destroying fungi below the main floor (indicating a wood moisture content of 28% or above). Note: Fungus will only grow if there is enough moisture, so it is important to find the direct cause of the moisture and work to resolve the problem.
  • Any visibly damaged wooden members below the main first floor of the home including columns, sills, door jambs, exterior stairs, and porches.

What if my CL-100 inspection comes back unsatisfactory?

During the sale of home in South Carolina involving a lender, a CL-100 is typically mandatory prior to closing. Therefore, the seller must obtain a CL-100 for the buyer to declare the home structurally sound in order to continue the purchase or sale of property.

However, in the event your CL-100 inspection comes back unsatisfactory, the remediation process can take up to 2 days to 2 weeks, and cost anywhere from $250 – $5,000 +, so make sure you order the CL-100 inspection immediately after the contract is ratified so you have time to remediate the issues and obtain a CL-100 for the buyer’s lender. Additionally, if the cost is prohibitive, don’t hesitate to request that your agent propose that the remediation of any issues are born by the buyer, or are at least split down the middle.

One other item to note is that not all lenders will require a CL-100 at closing. Therefore, if you are unable to attain a CL-100 by the closing date, ask your closing attorney to work with the lending institution. Specifically, a good compromise is that a CL-100 be delivered subject to the remediation process being completed after closing.

Always Take Preventative Measures.

As has been established, termites, fungi, wood rot, etc. can throw a serious wrench in the transaction. The good news is that such wood destroying organisms be treated and serious damage can be avoided if the home is covered by a termite bond.
If you’re planning to sell your house in the near future, here are a few tips to protect your home and ensure you receive a “CL-100 clear.”

  • Have your home regularly inspected
  • Remove debris near home and in crawlspaces, including wood piles and thick mulch
  • Provide adequate ventilation in crawl space and between plants and exterior walls
  • Install proper drainage and eliminate wood-to-ground contacts
  • Remove dense vegetation growing close to foundation or siding

Lastly, the best advice on combating termites is to never let them get a foothold to start. Keep up with repairs and keep your termite bond current. This will help you ease through the process of obtaining your “CL-100 clear” and continuing with the purchase, or sale, of your beautiful home.

SC Income Tax Credits & Benefits Affecting Residential Property

Residential Historic Rehabilitation Tax Credit

The South Carolina legislature recently passed a benefit which mirrors the existing Commercial/Income-Producing Historic Rehabilitation Tax Credit; however, the new law now allows residents who rehabilitate their owner-occupied residence to be eligible to subtract up to 25% of the costs of renovations in the form of a 1:1 state income tax credit, which may be (a) taken as a personal tax credit, or (b) monetized through a tax credit exchange market where SC State Income Tax Credits typically sell for $0.65-$0.70 on the dollar.

(i)    For homes to be considered, they must either be (a) listed on the National Register of Historic Places, (b) contributing to a National Register historic district, or (c) determined eligible for individual listing in the National Register by the state’s preservation office.

(ii)    The property owner must submit a historic preservation application, along with architectural plans and technical drawings, to the states Historic Preservation Office (SHPO) prior to the commencement of construction.

(iii)    The property owner must spend at least $15,000 in 36 months on efforts to rehabilitate the residence.

(iv)    Qualifying Rehabilitation Expenditures (QREs) include items such as:

a.  preservation and rehabilitation work done to the exterior of the residential structure;

b.  repair and stabilization of historic structural systems;

c.  restoration of historic plaster;

d.  energy efficiency measures except insulation in frame walls;

e.  repairs or rehabilitation of heating, air-conditioning, or ventilating systems;

f.  repairs or rehabilitation of electrical or plumbing systems excluding new electrical appliances and electrical or plumbing fixtures, and architectural and engineering fees.

Conservation Easement

Another potential tax benefit is a Historical Conservation Facade Easement (HCFE”). An HCFE is the tax-deductible grant of an historic façade easement to a 501(c)(3) tax exempt entity (i.e. The Charleston Historic Preservation Society), which essentially provides for the preservation of the building’s facades (all sides and roof).

The charitable organization that receives the easement has the legal ability to enforce it, should the need arise. If a conservation easement is selected, a charitable contribution is available, thus reducing the individual’s income taxes. This makes financial sense for those in the high-income tax bracket.

The value of the easement is normally determined by the “before and after” method. This approach appraises the underlying property before the grant of the easement and after the grant of the easement, with the difference being the value of the easement.

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