The DUE DILIGENCE PERIOD in a real estate contract is there to protect the buyer with regards to a real estate transaction. It is provided as a negotiated time period from the date the contract is signed to give a buyer an opportunity to fully investigate moving forward with the sale. This is also typically the time period when inspections and appraisals of property are conducted. So if there is anything that could give pause for the sale of the property it provides a Buyer with a way to cancel the transaction before it becomes binding. If during this time the buyer decides the property is not for them, they can cancel and receive their earnest money back if specified in the contract. The expiration of the due diligence period does not terminate any other contingencies that have been added to the agreement.
During the Due Diligence Period, the buyer is responsible for undertaking the appropriate measures to ensure the soundness and longevity of the home. It is the time to start your financing and schedule for a home inspection and satisfy all contingencies in your contract and move forward to your closing.Some of the services that you may undertake during this period include:
This is your chance to make sure that the house is in good repair, additions are “up to code”, determine the presence of wood destroying insects, radon, etc., etc. An inspection of the property, the foundation, and the surrounding environmental may be needed to make sure the property meets the standards set forth in your written agreement. If there are issues or inconsistencies brought to light during this time you can negotiate the repairs, or delay and even nullify the contract.
Insurance is another item that will need to be taken care of. Experts recommend you obtain title insurance equal to the full replacement value of the home. This kind of insurance is purchased at closing and protects the buyers in the unlikely event that the title to the property becomes invalid. Homeowners insurance protects against theft, fire and liabilities. It often includes things such as bicycles, furniture and jewelry. Flood insurance is generally only necessary for flood-prone areas. The federal government issues this kind of insurance.
In addition to aforementioned types of insurance, you may want additional assurance for your new home. Home warranties are one way to protect yourself after you buy. Warranties for new homes protect against plumbing, wiring and structural defects. Existing home warranties cover things like major appliances and structural problems.
Having these procedures done in a timely and professional manner is a must. Investigate each service provider to make sure they are reputable and have a clean operational history. Your agent’s experience in this area will be invaluable.