What is this “Due Diligence Period” I keep hearing about?

Due Diligence is a great thing if you’re on the buying side of the real estate transaction.  If you’re the seller, it can be a very hectic time for you!  Either way, knowing what to expect is vital for both parties.  And being flexible and understanding will help get both parties to the closing table.

Due Diligence is a period in which the EnergyGuidebuyers get to use their most stringent “diligence” to determine if they are making a good investment.  Long gone are the days of Caveat Emptor, or let the buyer beware!  Today’s buyers are given every opportunity to investigate their future property and to ensure they are not making a mistake by purchasing it.

The DD period is a negotiable term in the real estate contract.  If I’m representing the buyer, I try to get as long as possible, even until closing.  Keep in mind the seller’s agent is trying to keep it as brief as possible!  What I’ve found is around 10 days seems to be acceptable to both sides, but it can be 0-60 days.  7-14 days is enough time for a buyer to get done what needs to be done all while giving the seller peace of mind knowing you’re not going to tie up his property unnecessarily.

Your REALTOR can help you, beforehand, know about any proposed changes in the area that will affect the property and/or any factors close to a property that may directly affect the property’s value.  But beyond that, it’s the buyer’s responsibility to determine if this is the right home for him.  Keep in mind both the seller and the seller’s agent are required by law to disclose any known defects with the property.  But even the most pristinely-maintained home can have unknown problems; buyers must be prepared to make these discoveries.  Due Diligence is your protection against that.

So what should a buyer do during his Due Diligence Period:

  1. INSPECTIONS!!!!  Don’t skip this part; this is the primary purpose of having a DD period, after all.  Some inspections you’ll want to consider are Home Inspection, Wood-Destroying Organism Inspection, Radon Inspection, Mold Inspection, Lead-Based Paint Inspection, and/or Asbestos Inspection.  Your REALTOR can help you determine which ones are recommended based upon the property’s location, age, condition, and other factors.  This is a buyer’s expense and should be planned for before the home search begins.
  2. Sex Offender Registry!  As far as I know, every state has a website where you can check the location of all sex offenders.  Go to Georgia’s here.  This information may not be important to your purchase, but if it is, check it!
  3. Check out the neighborhood!  Go there multiple times at different times of the day.  Do you have kids?  Won’t it be nice to see children out riding their bikes?  You never know what a neighborhood has to offer by visiting it once or twice.  Also, check the shade/light ratio of your property at different times of the day.  If you love to work in the yard, you’ll want to know how your garden will grow!  Go see it; you’re possibly going to be living there soon.
  4. Check your commute!  I know, here in Atlanta, the time and direction of your commute can have a HUGE impact on your day.  Drive it at different times to see what your life will be like after moving in.
  5. Look at the crime reports!  Neighborhood crime statistics are easy to pull.  There’s really no excuse in today’s world for anyone to say “I didn’t know the area had so much crime.”  Find those statistics for yourself, and compare them to the area’s and state’s average.  Put it in perspective and be knowledgeable.
  6.  School Ratings!  Whether you have children in the public schools or not, the local schools will have an influencing factor on your resale value.  Don’t overlook this.  You can start here.
  7. Let your REALTOR handle all negotiations and communications.  The agents will communicate with each other, so if you need information from the other side, tell your agent.

What should a seller do during Due Diligence:

  1. Be patient!  You remember when you bought the house, right?  You wanted to know all the things that are being asked now.
  2. Be honest!  It’s better to give the information up front than for it to be discovered later…then you might look like you’re being deceitful, and there’s no tolerance for deceit in such a huge investment.
  3. Be understanding!  If you see the prospective buyer driving up the street several times all crazy hours, don’t call the law!  He’s just looking around.
  4. Provide documents that have been requested.  If termite treatment documentation is requested, give it.  If appliance manuals or model numbers are needed, give it.
  5. Be flexible!  You want to sell the house.  Your buyer wants to buy the house.  Allow all the inspections.  Be flexible, within reason of course, with the scheduling.  You shouldn’t be there for it; let the agents handle this.
  6. Let your REALTOR handle all negotiations and communications.  The agents will communicate with each other, so if you need information from the other side, tell your agent.

If you think this is a lot to do during a short amount of time, try to imagine what it will be like for you if you buy the “Money Pit” we all fear!  A little bit of sweat equity at the beginning will save you tons of valuable mental, emotional, and financial resources later.

And the next time you hear someone lament, “My agent never told me there was so much traffic through here” or “I don’t know why my agent didn’t tell me the water treatment plant smells funny,” you can ask him why he didn’t do his due diligence!

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