Buying a Home? The Due Diligence Period Explained

When most people buy a home, the contract is subject to a “due diligence” period, when a buyer is able to terminate the contract and get their earnest money back. This is one of those terms that real estate agents throw around and assume that buyers and sellers understand, but often the purpose of the due diligence period is not fully understood.

Essentially, the due diligence period is the first few days after the contract becomes binding. A contract is binding when both the buyer and seller have agreed to the terms, signed the contract and the complete contract has been delivered to both parties. The date that this happen is called the binding date and it marks the beginning of all contingencies on the contract, including the due diligence period.

Many buyers ask the seller for a ten day due diligence period, but the length of the due diligence period is negotiable. Ten days is typically enough time to complete everything that needs to be done, but  if you are not able to complete the work recommended during this period or you are not able to reach a satisfactory agreement about the issues found during the due diligence period, all parties can mutually agree to extend the due diligence period. Generally, when a
satisfactory resolution has not been found by the end of due diligence, it is in everyone’s best interest to extend the timeline.

For many buyers, “due diligence” is synonymous with “home inspection,” and while having a good inspection is certainly a critical part of due diligence there are other issues that should be considered during this period.  In addition to having an inspection conducted on the property, it is also important to inspect the neighborhood, because while many features or conditions of the home can be changed, the neighborhood cannot. Some things to consider investigating during the due diligence period include proximity to any places or facilities that you might find troublesome such as a prison, cemetery, airport, or landfill. Additionally, you might also want to find out more information about your
potential neighbors, including performing a violent sex offender search at the Georgia Bureau of Investigation website. It’s also a good idea to research local schools, crime rates, and government and make sure that you are comfortable with all of these.

On the actual property, in addition to the dwelling, you’ll also want to conduct research about the land such as property boundaries, flood plains, power lines, and zoning. If you are buying a condominium or a home in a neighborhood with on HOA, make sure that you have a firm understanding of the bylaws of the homeowner’s or community associations and that you know what the annual or monthly required fees are and what services are included in those fees.

Many real estate agents rely on the information given by the current owners of the property in the seller’s disclosure statement in order to answer any questions you might have and this is usually a very good source of information. However, you will want to independently verify any information provided by the current owners with a third party source because many owners, even if well-intended, are unaware of certain factors that may affect your decision. It is the buyer’s responsibility to conduct their own research during this period and to verify all information.

I am happy to answer any questions you might have about the due diligence period or the home buying process. Please visit my website about Peachtree Corners Real Estate to get in touch.