How To Do Due Digilence Before Buying a Home?

Once you make an offer on a home and it’s accepted, there’s a period lasting a few weeks before you close the deal. During this window of time, buyers are often told to “do their due diligence” on the home they soon hope to own. What does this really means? For many this term may be new and seem like a jargon that can be very confusing. 

In the world of real estate transactions, due diligence is a fancy term for “do your homework.” Before buying a property, you should fully investigate it for potential problems that could cost major money to fix after you’ve moved in. “Due diligence in residential real estate means [making sure] you’re getting the asset you’re paying for. 

In simple words it is the last opportunity to  make sure you’re not getting everything you were promised while buying a home. And if you do find flaws, you’ve got time to negotiate with the seller, who could help you fix them or lower the home price. Or, if the seller refuses, you are free to walk away from the deal—and as long as you’ve placed some contingencies in your contract, you won’t have to forfeit that hefty deposit.

Due diligence is definitely worth taking seriously, so here’s a checklist of what you’ll want to scrutinize before closing the deal.

  • A home inspection:Most home buyers hire a home inspector to scrutinize the house top to bottom, looking for problems that could cost the buyer major money to fix. The inspector is looking for a crumbling foundation, faulty HVAC systems, termites, leaking roof, and other potential big-ticket problems. 

My Advice: You should also hire a separate professional to test for biotoxins, including mold, radon, and asbestos. These hazards are typically not checked by a home inspector and are expensive to fix. You should also check for larger neighborhood issues that could have an impact, like whether your home lies in a flood zone or near some environmental hazard. These can all be reasons to reopen negotiations with the seller and, if you’re not satisfied, prompt you to walk.

  • A title search: Before you can “take title” to the home—a fancy way of saying you establish legal ownership of the property that’s entered into public record—you’ll want to do a title search to make sure you can indeed do that, free and clear.

My Advice: For instance, what if the previous owner’s long-lost brother shows up claiming he owns the property, or a creditor has placed a lien on the home due to unpaid debts, or there are unresolved boundary disputes with a neighbor? Such problems can be costly to address, and a title search will bring them to light so you can broach these issues with the seller before you inherit a problem you don’t want to have.

  • Condo or HOA rules: If you’re buying a condo or property within a homeowners association, you’ll want to thoroughly review its declaration of covenants, conditions, and restrictions, or CC&Rs. Basically this is the list of rules and regulations, as well as fines for infractions. Some can be quite strict, reserving veto power over the color you paint your home or the number or type of vehicles you can have in front of your house (RVs are sometimes banned).




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