Real Estate Glossary – “Due Diligence Period”
December 27, 2007
The Due Diligence Period in a home purchase contract is the time during which the buyer conducts any and all inspections of the home that she/he chooses.
The Due Diligence used to be called the Inspection Period. Many agents and home buyers/sellers still call it that. The AAR changed the terminology to Due Diligence when they overhauled the language in the purchase contract in May 2005.
Typically, the Due Diligence Period lasts for 10 calendar days, although buyer and seller may negotiate for more or less. The Due Diligence Period begins on the first full day after the contract is signed by both parties and delivered to both. It’s important to note that the Due Diligence Period — and all contract time periods — are counted on calendar days. Weekends count. Holidays count.
Legally, buyers can pretty much take the house apart brick by brick and inspect it all, as long as they put it all back together again the same way it was. Practically speaking, most buyers get a general home inspection and often a termite inspection. Some add a roof inspection, a pool/spa inspection, a mold inspection, and maybe an inspection of the heating & cooling systems. The seller(s) should provide the buyer(s) and the home inspectors with the Seller’s Property Disclosure Statement prior to the inspections. By contract, that document is due within 5 days after contract acceptance.
Buyers usually pay for their own inspections (although who pays is technically and legally negotiable). Almost all inspectors require payment up front, with the exception of many termite inspectors. Many termite inspection companies take payment out of the escrow funds when the transaction closes.
After the Due Diligence Period ends, the buyer and seller have a chance to negotiate again over which recommended and/or requested home repairs are completed.
Related Posts – FAQ files
December 28, 2008 at 5:10 pm
[...] contract. In plain English this means that if you, the buyer, back out of the purchase after your Due Diligence period, the seller has the right to keep your earnest money as compensation for the lost time on the [...]
July 7, 2010 at 10:08 am
We,the home buyers, bought a foreclosure home. By means of FHA203K Loan. We were given 180 days to complete the renovations. Our general contractor is backing out due to no start up money from the bank. There was a paper work missunderstanding. He has no funds to put up front to start the project. We are only allowed 2 draws on $30,000.00 we are trying to get the bank to front some money in order to keep our contractor and start the project. Now we are getting cold feet, because no other contractors are willing to touch this project for that price of the bid. What can we do? Would we be able to give the house back if we don’t have a contractor to do the work? Can the sellers sue us for what little work we have personally put into it on our own? (Without our contractor knowing.) Thank you for your time…Mr.& Mrs. Cold feet Home Buyers
July 14, 2010 at 8:01 pm
I am a Realtor and I sell tons of forclosures. I have never seen the bank keep any buyer’s earnest money. The bank is not going to sue you, they will just put it back on the market promptly to try and capture another buyer. The contractor seems to be in the worst position if he has already done work on the property because it is going to be very hard for him to get reimbursed for his expenses if he walked off the job. You might want to give it one last shot and request the seller to make some of the larger repairs for you and let the contractor finish off the other repairs. These sellers get desperate when they know they have a large problem with a home, if they don’t make repairs it will probably end up at auction. I hope this info helps, you don’t have a big problem unless you have already personally dumped a large sum of money into the property.
July 14, 2010 at 8:50 pm
Note: this site has moved to http://ThePhoenixAgents.com
Garrett makes a noble attempt to answer your question, above. But I am also a Realtor (I write this blog) and I say no one currently has enough information to answer your question. First, what state are you in? Real estate rules are local, even when dealing with federal FHA 203k money. Second, do you already have a Realtor agent working for you? THAT PERSON should be answering this question. If your Realtor can’t help you, go to his/her boss, i.e their broker. Finally, I can’t tell if you already closed on the home (the purchase is complete) or if you’re still in escrow. Any competent Realtor should advise buyers NEVER to do ANY work on a house you don’t already own. If you already bought it, it’s not as easy as I want to “give it back”.
It sounds like you’re in a pickle. Perhaps you need a real estate attorney? I emailed you privately about this.
April 30, 2011 at 11:12 pm
Greetings! I know this is somewhat off topic but I was wondering which blog platform are you using for this site? I’m getting tired of WordPress because I’ve had problems with hackers and I’m looking at alternatives for another platform. I would be fantastic if you could point me in the direction of a good platform.