What does “Due Diligence” mean on a real estate contract?
Due diligence is the period of time allotted for the buyer, after seller’s acceptance of an offer, to investigate both physical and financial aspects of the property. Due diligence is typically 10-15 days, but can be as low as 1-3 days, especially if the offer is cash. The following are just some of what Realtors and their buyers do during due diligence:
- Home inspection
- Appraisal
- Walk-thru’s
- Investigate for insurance claims
- Get insurance quotes
- Title search
- Check that taxes have been paid to date
- Evaluate property risks (i.e., flooding, drainage, etc.)
- Review zoning rules
- Survey
- Review covenants, deed restrictions and HOA rules
- Negotiate
Think of it as the amount of time to ensure the investment is worth your money. It’s also the time to get out of a purchase and sale agreement and still get your earnest deposit back. In contrast, if you go past your due diligence period and try to terminate the agreement, your earnest is more likely to be forfeited to the seller. – Heidi Fafard