So they accepted your offer! Now what?
And so begins a time for nail-biting and heavy hopefulness known as due diligence.
Here’s what to expect from there:
What in the world is due diligence?
Once a contract is signed, you’re officially in the “due diligence” phase. As a prospective buyer, you’ll pay a non-refundable fee–usually $500 to $2,000–within 24 hours. (This isn’t to be confused with earnest money which we’ll cover in next month’s blog.) In a way, a due diligence fee holds your place in line for buying a house. It gives the seller a little credit for taking their house off the market while you negotiate and gives them a small cushion should you decide to abandon the contract.
The due diligence fee is often negotiated by the buyer who wants the fee as low as possible. Buyers want the option to get out of the contract with the smallest loss if they decide not to buy the house. If it’s a particularly hot property, buyers may battle to offer the higher due diligence fee to prove their intentions. It’s typically non-refundable.
Due diligence does not apply to new construction.
What happens during due diligence?
Most due diligence periods last between 15 and 30 days. That gives you as buyer time to set up a professional home inspection, HVAC inspection, and termite inspection completed. Buyers may also want other specialized inspections such as a pool, septic, or radon inspection. And if you’re buying an older home you may need additional inspections.
This time period is also used to authorize or undertake the loan process.
Finally, and critically, due diligence is a great time to start the Clean Title search!
What happens after the inspection?
Things get really interesting with the inspection report. You have to make the tricky decision to ask the seller to fix any major repair items that turn up.
One option is to simply have the seller agree to fix any issues, at their expense, prior to closing. Another common choice is to ask for a reduction of price or a repair allowance from the seller. Some buyers might even choose to help with closing costs instead.
Sometimes, when an agreement can’t be reached, the buyer will cancel the contract and walk away from the sale.
Wait. Can I really get out of the contract for no clear reason?
Yep. That’s what the fee is for. If you decide, before the end of the due diligence period, not to move forward with the purchase of the home, you can walk away for any reason (or no reason at all). You’ll only lose your due diligence fee. If you ultimately decide to buy the home, the due diligence fee carries forward to the closing and gets credited towards the purchase price.
The only instance in which the due diligence fee is refundable is if the seller breaches the contract.
So how do I avoid issues in the due diligence time period?
Your best bet is to follow the advice of a professional Real Estate agent and to talk to a reputable title company with exemplary service and care. A good team backing your efforts will keep you informed of what’s happening every step of the way. They’ll stay with you until that day you sign on the dotted line and make that house a home!
At Clean Title, LLC, we’re proud of our track record and the recommendations our clients have shared. (Check out some of our reviews on our Facebook page). Clean Title, LLC, is researching the past to protect your future!
Check out our home buyers’ Clean Title FAQs and reach out at 985-277-5095 anytime with questions!
Stay tuned next month where we talk about earnest money and a checklist for closing on your new home!
Disclaimer: This blog is not intended to give legal advice. Keep in mind that each state has different real estate laws and that throughout Louisiana, rules, and customs can vary among parishes and regions. If you’re thinking of buying or selling a home, please check with your local Real Estate professional or Real Estate Attorney on the specifics of all Real Estate matters.