There is a time period between when home buyers get an offer accepted by the seller and the closing. This is often when buyers are instructed to do their due diligence. But really what does due diligence even mean?
The short answer is that due diligence is the time that lenders and the third parties involved expect home buyers to research their property to make sure the sale is not going to be one that they regret.
No one wants to find any problems during the time between an accepted offer and closing. Of course, it is not realistic to expect any property to be without problems. Even a new build may have something that is not quite up to par. It all depends on how the home buyer views problems to determine what is a “large” issue versus a “minor” one.
Inspections are one item that people focus on during this time. All inspections will have numerous small cosmetic items for the home buyer to pay attention to. Any bigger items are ones the buyer needs to discuss with the homeowner to see if they are going to fix them before closing.
Keep in mind that sellers can refuse to fix major problems. At this time home buyers needs to look at their offer to see if they have a contingency that allows them to stop the transaction if the problem is too much for them to take on. Without this contingency, they will breach the contract if they walk away.
Some due diligence laws protect the home buyers in the event a major problem is found during this time. Each area has its own laws surrounding this so be sure to talk with a local professional to see where you stand.
Getting an inspection on a home before buying it is common and recommended. The inspector will have a large checklist of items to examine. These will range from tiny cosmetic problems to major issues with the HVAC system or foundation. All of these problems will be compiled into a report that is given to the home buyer at the end of the process.
Be aware that a basic inspection does not test for mold, asbestos, or radon. These are all tests that must be purchased separately. They are important tests to perform and should not be skipped even though they cost extra. If discovered later they can be an expensive problem to fix.
Taking the title of the property means the home buyer is legally the new owner of the property per public record. Using a title search will help home buyers know that the title does not have any liens or problems that will not allow them to take possession. If anyone else has claims to the property it can cause problems once the new buyer takes possession. So these issues should be resolved before closing.
Homeowner associations will all have different policies for their homeowners to follow. These policies are outlined in a CC&R which are the covenants, conditions, and restrictions. A home buyer needs to carefully read through this document to make sure there will be no problems once they move in.
Living with a homeowner’s association can be difficult for some homeowners. Some associations are much more strict than others and a homeowner should never assume what regulations will be put in place. Not listening to these rules once the homeowner has moved in can cause huge problems.
Due diligence gives the home buyers the opportunity to discover problems before they own the home. Even though they are dedicated to making the purchase there can be problems that arise that make it impossible for them to take possession of the home. Learning about the problems before closing on the property will save the home buyer many headaches down the road.