One of the real estate terms frequently used when you are in the process of purchasing a home is the Due Diligence Period.
But what is it exactly? Why is it so important? Is it really that big of a deal?
Due Diligence is the time period buyers have to make a decision on whether or not they want to purchase a property without losing earnest money. It gives buyer’s the opportunity to perform their due diligence on the property. It’s a very important time period to inspect the home and decide if this is the right choice for you. It is a big deal because if you don’t make a decision to terminate during this period you will be out of earnest money.
What To Know
About Due Diligence
Order an Inspection
You want to get an inspection done during your due diligence period, so you have time to either walk away and receive your earnest money funds or renegotiate with the seller on concessions.
Pay Earnest Money
Your contract should state the time frame you have to pay earnest money. Make sure you follow this guideline, which is typically during the due diligence period. You do not want to breach your agreement as it could cause the seller to terminate your agreement or seek legal damages.
Think and Process Your Decision
The hard part is sort of over! Finding a home can be a BIG challenge. Now that you’ve found the home, you need to be absolutely sure this is it. The time period to change your mind IS the Due Diligence period. Should you change your mind after that, your earnest money will NOT be refunded.
Get Disclosures
Seller’s usually have a document called “Seller’s Disclosure'“. If they do, make sure you get a copy. This document discloses information about the property that the seller would know such as the age of the HVAC system, any issues the home has experienced, last termite treatment etc. Also, Retrieve Homeowners Association Covenants because if you plan to do certain things to your new home, make sure the HOA allows it.
Get Funding
Due Diligence should be the time frame that you are working to get the funds needed to purchase your property. Whether cash or financed, do not wait until after due diligence to begin the process of obtaining a loan and/or getting cash necessary to purchase. It can be lengthy so cooperate with your lender and time is definitely of the essence.
Insurance
Check to make sure your property is insurable. You can get quotes for this during the due diligence period, and its wise to check just in case the property isn’t able to obtain homeowner’s insurance. This is sometimes due to undisclosed damage from a previous home owner filing an insurance claim.
Purchasing a home is an incredibly big decision. Make sure you properly vet the home prior to purchasing.
