What the Heck is Due Diligence?
After your offer is accepted, the next few days are referred to as Due Diligence. The amount of days (usually 10-12ish) is written into the contract. During this time, you have the right to have anything in your potential new home inspected. This is your chance to find out everything you possibly can about the home you are about to purchase. Most buyers only have a general home inspection completed by a licensed inspector. The cost can vary depending on the size of the house, but is usually in the ballpark of $300-$350. The inspector will examine EVERYTHING to which he/she has physical access: electrical, plumbing, windows, foundation, crawl space, roof, drainage systems, HVAC, etc. The buyer then has the option of having licensed specialists inspect specific areas of the house based on the findings of the general inspection. If he/she found excessive moisture or flooding in the crawl space, you might want to hire a specialist to give you advice on what needs to be done to remedy the situation and give an estimate on the repairs. If the roof was found to have significant granule loss, you should consider having a licensed roofer examine the roof in order for you to receive professional advice and opinions. You can even have the home inspected for lead-based paint or other hazardous materials. However, the BUYER is responsible for the cost of these inspections.
Inspection vs Appraisal
Inspection: determines what repairs might need to be completed on a house before closing
Appraisal: determines the value of the property
Once the inspection is finished, the buyer needs to narrow down which repairs he/she is going to ask the buyer to have completed. It is usually not a good idea to ask for every item listed in the Inspection Report to be repaired! Allow your REALTOR® to guide you in selecting which items are the most important. You also have to take into consideration the type of financing you will be getting; government-backed loans have much stricter guidelines as far as repairs they require. Your agent will then submit the Amendment to Address Concerns form which is the formal request for repairs. This list is completely negotiable; the buyer may agree to make all the repairs, none of the repairs, or may choose some of the items on the list to complete. However, this MUST be agreed upon before the end of Due Diligence!
Our advice: Make sure you ask for a licensed professional to complete repairs. Do you really want the seller’s Uncle Billy “fixing” the electrical system? That’s a house fire waiting to happen. See the sample amendment below.
The Crockers have a comprehensive list of home inspectors as well as other licensed professionals to contact for estimates, repairs, or advice.