Buying a House? Use the Due Diligence Period Wisely

From the outside looking in, buying a house seems simple. You find one you like, make an offer, line up financing, and move in. But it’s the dozens of intricate steps that happen in between these phases that make the home buying process more complicated. And one of the most important steps in the process is the due diligence period.

What is the Due Diligence Period?

Though laws vary from state to state, the due diligence period is basically a period of time between when a house goes under contract and when the buyer’s earnest money goes hard – meaning they can no longer walk away without losing it.

Depending on state laws and the wording of the contract, the due diligence period typically lasts for a few weeks and gives the buyer the opportunity to inspect the home, conduct research, and get all of their proverbial ducks in a row. If something comes back that the buyer is uncomfortable with, they may be able to walk away without any strings attached. In states with stricter due diligence laws, only certain issues allow a buyer to walk away without losing their earnest money.

Once the due diligence period comes to a close, things move one step closer to closing. While it’s still possible for a deal to fall through, the chances of it happening at this point are significantly lower.

Ordering Home Inspections

The due diligence period is no time to dillydally. A couple of weeks might sound like a long time, but there’s a lot to do. There are two categories of inspections to consider:

  1. Order a General Home Inspection

Inspections are arguably the most important part of the due diligence period. And if nothing else, you’ll want to order a general home inspection.

A general home inspection takes a look at the overall condition of the home and its main structures and systems. This includes elements like plumbing, electrical, roof, heating and cooling, appliances, and foundation.

A home inspection does two things for a buyer. First off, it exposes any serious issues that the seller would be required to fix in order for the sale to go through. (Plus any minor issues that the buyer wants to use in negotiations.) Secondly, it lets the buyer know what to expect over the first few years of ownership. For example, if the water heater is 17 years old and looks like it may go at any time, this gives the buyer a heads up that an additional expense may be coming in the next year.

  1. Order Additional Inspections (As Needed)

While a general home inspection gives you a detailed look at most aspects of the home, there are certain things it doesn’t do. Depending on where the house is located and what sort of protections you want, you may also consider ordering the following:

  • Termite inspection. This inspection looks for any signs of termite damage and/or active termites. If the homeowner has a termite bond, any damage will be fixed by the company they’re bonded with. If there’s no bond, the seller will still be required to fix the damage. You can then order a new bond that becomes active from your first day of ownership.
  • Radon inspection. Did you know that radon is the second leading cause of lung cancer in the United States? This dangerous chemical is naturally occurring and is invisible and odorless. An inspection can detect any presence of this toxic gas and provide peace of mind.
  • Mold inspection. If your general inspection indicates signs of possible mold, mildew, or higher than normal moisture levels, you may want to order an additional mold inspection to search for problems.

Each of these inspections will run you somewhere between $100 and $400 (on top of the general inspection). While this might sound expensive, it’s typically money well spent. If nothing else, the reports will give you peace of mind that you’re making a sound investment.

The Peril of Making Assumptions

When buying a house, never assume anything. Assumptions will get you in trouble. Every little issue – or anything that even could be an issue – needs to be researched, analyzed, and evaluated. Seek out advice from as many people as possible and make sure you’re surrounding yourself with experienced professionals who understand how the process works from the inside out.

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