A due diligence period is a length of time where a homebuyer has the ability to terminate their contract and receive a refund of their earnest money. During the due diligence period, the buyer will complete tasks, such as a home inspection, as well as evaluate the area. The due diligence period often occurs during the first few days after the contract becomes binding. This is referred to as the binding date and marks the beginning of all contract contingencies.
The due diligence period most commonly last ten days, but can be negotiated to be longer or shorter. If the house is being bought in a competitive market, the due diligence period may be negotiated to two or three days to gain attractiveness over a competing offer. The reasoning for the length of the period is that it allows the buyer to complete everything that they need to make a fair assessment of the home and the surrounding area. While in most areas of the country it is required that the seller disclose the known defects of the property, it is often up to the buyer to inspect all details that may affect their purchase of the home.
Here are some common tasks that the homebuyer should perform during the due diligence period:
- Have the home inspected: Have the home inspected to ensure that there are not any defects that will cause you to back out of your purchase. Speak with your inspector to clarify what the inspection includes, if there are additional items you will want to know about, you may need to hire additional professionals.
- Speak to your mortgage planner: Before going under contract on a property, you should already be pre-approved for a mortgage. If this is the case, once the due diligence period has begun, you should be ready to discuss a specific loan for the property with your lender.
- Speak to an insurer: Research home insurance providers and determine the insurance costs of the property. It is possible that you will discover the home to be in a flood or tornado zone, causing the insurance costs to be much higher than expected.
- Research the ownership history: By looking into the history of the home, you will be able to see if it has been recently flipped or foreclosed. Click here for a free home disclosure report.
- Research the neighborhood: While you have likely assessed the basic facts about the neighborhood, the due diligence period is a great time to dive deeper and uncover information such as crime ratings and environmental hazards. Try using online resources such as neighborhoodscout.com and familywatchdog.com to discover crime ratings.
If you have any questions or would like to learn more about the due diligence period, I would love to explain it to you. If you are interested in purchasing a new home or refinancing your current home, call me today to set up an appointment.Tags: Homebuying