Due diligence for real estate is often a lot of homework for a home buyer, covering a wide range items to consider before and during the purchase of a property. As one of most people’s largest assets, purchasing a house is a major financial decision as well as a change of location. Doing your homework and uncovering problems before closing can save money and aggravation. It may also help you avoid closing on a property that has too many issues. Discovering the house has house has termites or needs a new foundation, is best found out now instead of on the closing date, when it is too late to cancel the purchase agreement. Due diligence requires you to roll up your sleeves and dig into the details, so be sure to use this time wisely.
The due diligence period, also known as “contract pending” review, is a length of time, usually several weeks, during which necessary items will be addressed, including title issues, property inspections, or liens to the property. Full disclosure of any known defects in the property, easements, back taxes, fines or fees is customarily found during this period, before the closing date.
Home buyers are smart to find a local, certified home inspector who will give an independent third party opinion of the property under contract. In addition, having a real estate attorney to review the status of the property title, revealing any issues that might hinder a clear title, finding any liens against the property by contractors, unpaid taxes, overdue Housing Association dues, an updated plat of survey, insurance review, flood plain status and similar items can be checked. Another example is insurance coverage. Check with a local insurance provider on a homeowner’s policy to cover your largest asset. Can insurance be taken out on the property? The point of due diligence is the make sure there are no nasty surprises waiting for you after you move into your new home.