In many states sellers are required by law to deliver to the buyer, within a short time after a contract is signed, a “seller’s disclosure” that states what the seller knows about the property. Of course, a seller, when answering to the best of their knowledge, may not really know if their house has issues. Due diligence is your voluntary right to investigate the property, title, lot lines, condition of the building, its systems, and plans for the neighborhood, before you finalize the purchase of a home.
Applying due diligence when investing your hard earned money into a home is worth the extra time, care and expense necessary to determine whether the sellers disclosure is true. Home inspections and inspections by other professionals must be performed within a certain period. This is usually 15 – 18 days after the contract is signed for the home inspection, giving you time to renegotiate with the seller if material defects are found. Exercising your due diligence in the purchase of a home can save you thousands of dollars.
Is the title clear?
Once a Title Company or Attorney begins a search of the title of the home you wish to purchase, they may find errors or “clouds” on the title that can keep the sale from proceeding, until they are cleared up. A lender will not be able to complete a loan for you until the error on the title is corrected.
This can take time and if you are piggy-backing the purchase of your new home on the sale of your existing home, then “time is of the essence” and waiting for a title correction may not work for you.
Are the property lines clearly defined?
Is the fence on the home you are buying or is it on the neighbor’s property? A surveyor will quickly determine this and other issues if they are found. Lot line disputes keep attorney’s busy so it is better to determine if there is an issue with the size of the property and whether there are any encroachments, before you buy.
What is the condition of personal property?
One of the less clear issues in a real estate transaction is what personal property is and what it is not. Subject to many misunderstandings, there is an easy formula to find the answer. If it is attached to the home with screws, nuts, bolts, plumbing, or electrical it is a fixture and not personal property and should stay with the house. This includes built-in ranges and ovens, dishwashers, built-in microwave ovens. Freestanding items, including refrigerators and stoves are personal items and may or may not be sold with the home.
In the sale of a home, everything is negotiable so if you really like the brand new refrigerator, include it in the contract. The same goes for ceiling fans, window treatments, light fixtures, appliances, freestanding hot tubs and other items that may or may not be attached to the house. Noting everything you can think of to go with the house should be included in the contract. If the seller disagrees, the items can be negotiated. This will help keep things clear after the deal is final and you take occupancy of the home.
In what condition is the building and its systems?
A house is more than just its outward appearance. Material defects can be found from the foundations to the roof and a home inspector will walk through the home with you to find if there are any, or not. A home inspector will look for what is easily seen, like foundation cracks, water damage in the basement, loose shingles on the roof and leaky faucets. If you want an in-depth look at the foundations, heating and air system, plumbing, and electrical systems you may need to hire a professional with expertise in a particular area of knowledge.
A home inspector can find most material defects in a home, but they don’t open the cabinet of the heating and air unit or give the roof the type of inspection it might need. Don’t be shy about inspecting the home, it will be yours for some time, so if you question any system in the home or its structural integrity have it further investigated and renegotiate with the seller. If the defect is so bad that it negatively affects the home’s value, then you can walk away.
What are the developmental plans for the area?
This is important because you don’t want to buy and then find out that a new road will be roaring past your door in the next year, or that the area around you is going commercial in the near future. A trip to the city’s developmental planning office or help from a knowledgeable real estate agent can help you find out the future of the neighborhood where you are buying your home.
Your Due Diligence When Buying a Home
One of the most costly investments you will ever make, exercising due diligence when purchasing a home can add to its value. It can also help you save money if defects are found that can be remedied before the sale is final. Your actions will give you a level of assurance that the home is in good repair, is safe, and clean will go a long way toward your happiness with the purchase of your new home.
2 Point Highlight
Due diligence is your voluntary right to investigate the property, title, lot lines, condition of the building, its systems, and plans for the neighborhood, before you finalize the purchase of a home.
One of the most costly investments you will ever make, exercising due diligence when purchasing a home can add to its value.
