Buyers Due Diligence in Real Estate
What exactly is due diligence? In simple terms it is the investigation of a property that is performed by a buyer in order to determine whether or not they want complete the contract.
In North Carolina, the Offer to Purchase a property has changed dramatically in the last year, and more emphasis is now being placed on the buyer to perform Due Diligence on the property prior to finalizing the offer. They are given a specific time period in order to investigate the home, with the use of Home Inspectors or Engineers, perform radon testing, and basically leave no stone unturned. By the end of this investigatory period, the buyer should be aware of any issues and let the sellers know if the sale will continue.
This is a great change in my opinion. It places more emphasis on the buyer to become more active and involved in the purchasing process, and to learn more about the home they are wanting to buy. How well you investigate prior to purchasing, will determine how many surprises you will later run into in regard to repairs.
If you hire an inspector and then attend the inspection (which I highly recommend to every buyer when at all possible), the more you learn first hand what is going on with the home. Seeing and getting first hand explanations is much more effective than getting an email with pictures.
There are other things that are not covered by an inspector. If a well or septic is involved, there must be an inspection of these as well. Due diligence requires a trip to the Henderson County Health Department to see if there is a copy of the permit for a septic. And a trip to the city for a copy of the well permit will be needed as well. Both of these permits come with a overhead map of the property (hand drawn by the inspector) with measurements specifying where these wells or septics are located in relation to the border of the properties and the house. These can be very helpful to have when the well or septic person comes.
For a well, you will want to get a sample of the water and have it tested. For a septic you will want to have it emptied and cleaned to check for cracks or other issues. You will want to have the septic inspector verify that the tank is the correct size for the house. Ask your Realtor about other septic issues. There are many.
Due diligence requires a lot of leg work, but if executed properly, issues can be avoided down the road. Major issues can get you out of the contract with minimal damages to your wallet. And finding issues before signing on the dotted line can get you some assistance in repairs from the seller prior to closing.
Talk to your Buyers Agent if you have more questions about what is involved in the Due Diligence process, or you would like a copy of the new North Carolina Offer To Purchase forms.