If you’re in the market to buy a home, you’ve likely heard the term “due diligence period” thrown around. But what does it mean? In simple terms, a due diligence period is a specified amount of time during which a buyer can conduct inspections and investigations on a property before finalizing the purchase.

While it may seem like a minor detail in the overall home-buying process, it’s a crucial component of any real estate transaction. Let’s discuss what a due diligence period is and why it’s important.

What is a Buyer Due Diligence Period?

A buyer due diligence period is a defined period in which a buyer has to conduct inspections, review documents, and perform investigations on a property to determine if it’s a suitable investment before completing the purchase.

Why is a Buyer Due Diligence Period Important?

First and foremost, it allows buyers to identify issues with the property before they become the owner. This can include issues with the title, problems with the property’s structure, or environmental issues. By identifying these issues, buyers can either negotiate with the seller to address the issues or back out of the transaction altogether.

Moreover, this period allows buyers to better understand the property’s condition and potential future costs. This information is important in determining if the property is a worthwhile investment and if the purchase price is fair.

What to Do During the Due Diligence Period?

During this period, buyers often hire professionals like appraisers, surveyors, lawyers, and engineers to conduct investigations. These key tasks can include:

• Home inspections to identify any issue with the property’s structure, systems, or appliances
• Environmental inspections to determine if there are potential hazards on the property
• Title searches to ensure that the property has a clear title and that there are no liens or encumbrances
• Land or property survey to give you a legal description of where the property you’re buying ends and the neighboring property begins
• Verify if the property complies with all zoning regulations and restrictions
• Review of the property tax records and zoning regulations
• Review of homeowners association documents and financial statements

Checklist for the Property’s Interior

• If there’s a seller’s disclosure statement, look over it carefully
• Conduct a general home inspection, checking for mold, water quality, insects, etc.
• When buying a condo or townhouse, ensure no special assessments or significant upcoming fee increases exist
• Ensure no water penetration into the home
• When there’s a homeowners association, ensure there are no pending lawsuits
• Get a breakdown of the home’s utility costs
• Check if there are any recent insurance claims on the property

Checklist for the Property’s Exterior

• Make sure there are no buried underground oil tanks because if they leak, cleaning up can be an environmental hazard and very expensive
• Check for any adverse conditions around the neighborhood bringing down property values like proximity to large power lines
• Make sure there are no property line violations
• Ensure there are no upcoming zoning changes
• Have a septic tank inspection if there’s no city sewer
• Look over neighborhood and school rankings
• Check to make sure the property is not in a flood zone
• Check the local crime rate

FAQ

How long is the due diligence period?

Typically, it begins after the seller accepts the buyer’s offer and ends before the closing. The length of the due diligence period can vary depending on the specifics of the transaction, but it’s usually between 10 and 21 days.

Is there a limit to the repair items I can ask the seller to perform?

There’s no limit but the seller is not obligated to agree to any of them. Repairs, if any, are completely negotiable.

Must the repairs be completed before the end of the due diligence period?

No, but the seller is required to complete any repairs in a workmanlike and good manner before the settlement date. Failure to do so could result in a breach of contract.

What can I do if I am not satisfied with the seller’s response, or lack thereof, to the repair request?

You can terminate the contract or agree to move forward without the repairs.

Am I allowed to inspect the property to verify the repairs have been completed even if the due diligence period has ended?

Yes, you can verify it during or after the due diligence period. You also have the right to do a final walk-through.

The Bottom Line

As a buyer, you are responsible for ensuring your home isn’t just of the quality you require but also suitable for you and your loved ones. By leaving no stone unturned in a thorough inspection, you can close the purchase with confidence. To help you avoid buyer’s remorse, make sure you take advantage of the due diligence period.

If you ever need help with these things or are looking for a trusted advisor, feel free to reach out. Never underestimate the value of having someone on your side during these crucial decisions of your life.