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22
Real Estate Basics: What Is Due Diligence?
If you've ever had a contract accepted for the purchase of the house you want to call home, then you know what a relief it can be. It's a major portion of the home buying process that you can cross of the to-do list.
But what comes after? It's easy to forget that the contract being accepted is the beginning of another portion of the home buying process. During escrow, the time between a contract acceptance and closing, is when buyers must do their due diligence. Due diligence is essentially making sure you want to actually buy the property by having it inspected and researched.
Alabama is a buyer beware state for existing home sales, which means exactly what it sounds it does. According to the Alabama Real Estate Commission, caveat emptor or buyer beware means "that neither the seller nor the seller's agents, unless asked, are required to disclose defects, except those which might pose an immediate health or safety risk to the buyers. While sellers and their seller's agents must not misrepresent conditions they are asked about, it is most important that buyers perform their due diligence."
Along Alabama's Gulf Coast, this due diligence period typically means having a Wood Infestation Report done (WIR) to inspect for the presence of termites/termite damage and a home inspection done to find any other potential concerns about a property.
Since securing a termite bond falls on the buyer in both Baldwin and Mobile counties, you will be responsible for securing the company to do the inspection. Our area is prone to termite issues, so be sure to find a trusted company to do your inspection and bond the home you want to purchase.
Using an experienced company is also vitally important for your home inspection, which could uncover issue such as moisture or mold in a crawl space, cracked window casings or fault plumbing. The list of potential discoveries during a home inspection is as endless as the potential issues that can occur while owning a home. While it might be tempting to forgo a home inspection in certain instances, it is one of the best ways to protect yourself from future issues at a low cost.
During due diligence is also when you would have a survey done of the potential property if needed as well as find favorable homeowners insurance and internet. Your title company will be checking to ensure the house has no issues that would prevent it from begin sold, such as a lien, and your financing will be verified prior to closing. It's a good idea to research any HOA/POA restrictions during the time, too.
Post research and inspections if you do continue to want to buy the property, you may be able to negotiate having repairs done for any issues that were found during an inspection and continue the closing process. If not, contingencies in your contract will often let you out of the contract, though you may or may not get to keep your earnest money deposit depending on the language in the contract.
As you can see, the due diligence portion of buying a home has many moving parts. Having a trusted REALTOR® can make all the difference in helping a transaction close smoothly.
