What is Due Diligence?

Due diligence is an important step in the home buying process that enables a buyer to thoroughly investigate a property before making a purchase. It is a period of time during which the buyer can review all of the information related to the property, including its condition, title, and any potential issues. The due diligence process is typically included as a contingency in a purchase agreement, and the buyer has the right to terminate the agreement if they are not satisfied with the results of their investigation.

The due diligence process typically begins once a purchase agreement has been signed. The buyer will have a set amount of time, usually a few weeks, to review all of the information related to the property. This can include things like the property's condition, title, zoning, and any potential issues such as environmental hazards or zoning violations. The buyer may also want to hire an inspector to conduct a thorough examination of the property and report on any potential issues.

During the due diligence period, the buyer also has the opportunity to review any disclosures that the seller is required to provide. These disclosures may include things like the property's history, any known defects, and any potential hazards such as lead paint or asbestos. The buyer should also check for any outstanding liens or judgments against the property and review the title to ensure that the seller has clear title to the property.

The due diligence process provides buyers with the opportunity to thoroughly investigate a property before making a purchase. However, it also comes with some risks. For example, if the buyer is not satisfied with the results of their investigation, they may choose to terminate the purchase agreement and lose their earnest money deposit. Additionally, if the buyer takes too long to conduct their investigation, they may miss out on the opportunity to purchase the property if another buyer makes an offer.

In conclusion, due diligence is an important step in the home buying process that enables a buyer to thoroughly investigate a property before making a purchase. It typically begins once a purchase agreement has been signed, and the buyer has a set amount of time to review all of the information related to the property, including its condition, title, and any potential issues. Due diligence process also provides buyers with the opportunity to review any disclosures that the seller is required to provide. However, it also comes with some risks, such as the termination of the purchase agreement and losing the earnest money deposit or missing out on the opportunity to purchase the property if another buyer makes an offer. It is important for buyers to carefully consider the risks and benefits of the due diligence process before entering into a purchase agreement.