Allowing Home Buyers To Due Diligence On Your Home
Due diligence refers to the investigation the buyer carries out on your property. It may happen before the buyer makes an offer or between the time of the offer and the closing. Generally, buyers are allowed due diligence 24 hours after making an offer on a property. To some sellers, due diligence is a nuisance as it drags the closing time and can reduce the chances of the buyer signing the final documents at the closing table. However, it is a blessing to buyers. It allows them to have a closer look at the home they admired from afar to help them make a concrete decision. If they find damages they are not comfortable with, they may reach an agreement with the seller on how to repair them or decide to move on completely. In most cases, buyers will receive a full return of their earnest money deposit (EMD).
In this article, you’ll know all about allowing home buyers due diligence on your home.
Generally, buyers have the right to demand a home inspection on your property. A professional inspector will check every nook and cranny of your home to assess how solid it is. If it is safe to live in and to estimate how much will have to go into repairs if the need arises. Certain home inspections have been made compulsory by the federal government. They include inspecting your property for lead paint and radon gas that can cause health when humans have been exposed to them for a long period.
Your roof, plumbing, heating, cooling, electrical, and kitchen appliances will come under scrutiny. After which the inspector will report on their states, point out what needs repairing, and what belongs in the trash.
The results of this inspection will tell the buyer whether or not to reach a compromise with you on the repairs.
Home Value Assessment
At this point, a real estate agent assesses your home to know its true value. It is determined by the location of your home, the condition of your home, its current market value compared to similar homes in surrounding neighborhoods, etc. You may have to drop the price of your home if it is found to be higher than it ought to be. The buyer has more power at this point if the initial contract has an appraisal contingency stating they can renegotiate the price of your home.
If the buyer is taking a bank loan, an appraisal is compulsory as it lets them know how much to loan you.
Home Owners Association (HOA)
Since HOA has strict restrictions and covenants that some single-family homes, most condominiums, and townhomes must adhere to, buyers ought to go through those covenants during due diligence to determine if they can put up with them. HOA can place restrictions on where to park your car, and what color of paint to use on your property. These covenants and restrictions are mainly to maintain a uniform look in the neighborhood and keep up to a certain standard.
Buyers are legally permitted to change their minds about purchasing your home within due diligence even after sending in their offer. They can give any reason for this decision as long as it evident that buying your property will not be beneficial to them. It can be as a result of irreparable damage, or the presence of a red-light district in the next part. Buyers may also propose changes that must be made to your home before they can move in, and if you do not agree to them, they will leave. Legally, they are free to walk away with the funds deposited at escrow as long as it is during due diligence.
Owner’s Title Insurance
Buyers usually do a title search on the property as far as 30 years back during due diligence. The title search is to find out if the property has any ownership issues. Liens must be paid up in full by the seller before the home is finally sold to the buyer. However, there are no liens, ownership issues, or title claims to the property, the buyer can then purchase it. But before doing that, buyers get owner title insurance that is a legal document to protect themselves from any claims on their property discovered after closing.
If the claims are valid, the insurance company will foot the bill.
Personal Survey By The Buyer
Buyers can decide to survey your home and its environs. They may want to check if there are sex offenders in the area, the crime rate, red-light districts, the distance to the nearest school, and other amenities. They may even speak to a few of your neighbors to get more information. The goal is to know the type of people who live in that area and to assess if they will be comfortable living among them.
Request Seller’s Disclosures
It is a report on the past and present state of the house. It gives the buyer meaningful information on your home that may include the age of some of your appliances. This information is enough to let the buyer decide on whether or not to purchase your home.
Some buyers may go as far as performing due diligence on you. They will do a background check on your lifestyle, habits, tax history, and other such details to assess your level of credibility. While some sellers may see this as intrusive, it is normal for buyers to want to know from whom they are buying.
The above list of tasks a buyer may want due diligence for is not comprehensive. Other tasks include: asking about warranties, request a land survey, and how closing costs will be shared. As a seller, it is natural to be slightly uncomfortable with all these procedures. However, the more room you give buyers to due diligence, the higher your chances of finding the right