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Maybe you have not written an Offer To Purchase in our state in several years and have not used the current contract.  Maybe you are a first time homebuyer trying to understand what you have heard about the “due diligence” time period when buying.  Maybe you are from out of state and considering buying a home here and have found references to this due diligence process on line.  What does it mean to you?

Due Diligence is the buyer’s opportunity to engage in a process of further investigation of the property and the transaction as described in the Offer to Purchase within a period of time negotiated and agreed to by the seller and the buyer.  For the seller, the due diligence represents some financial consideration (or fee) paid by the buyer directly to the seller for the right to investigate the home to insure the buyer indeed wants to buy.

The time period and fee for the due diligence is spelled out in the contract. There needs to be adequate time for items on this check list to occur.  For example, it a contract calls for a home to close in 6 weeks, a 3 or 4 week due diligence time period might a realistic time frame for investigation.  Such things as home inspection(s), septic and well water inspections, survey, appraisal, title search, loan qualification and application, repair negotiation, etc. happen within this time period.  Generally speaking, the appraisal and the survey are the last items to occur in the time frame.

The fee is negotiable in the offer and appears in the contract paid by the buyer directly to the seller. The fee is nonrefundable except in the event of a material breach of contract by the seller or in the case of damage loss by fire or other casualty prior to closing. The fee is the property of the seller and is credited to the buyer at the time of closing toward the purchase price of the home.

Due diligence fees in our Charlotte real estate market generally range between $200 and $1000 depending on the price of the property.  In multiple offer situations, due diligence fees tend to step higher.  Buyer agents work to keep them low for this buyers and listing agent obviously work to keep them high on behalf of their sellers.

What happens at the end of the “Due Diligence” period?  The buyer must make a decision to move forward with the contract or to terminate.  It is the buyer’s sole decision to make, assuming it is made during the “Due Diligence” period and not afterward.  The buyer may terminate “for any reason or no reason”.  The termination is a notification to the seller and must be in writing within the due diligence period.

Learn more about the buying process in our Buy With Us section of this website.

Mar 08, 2015 | Filed under: First Time HomeBuyers, Good To Know Info, Homebuying & Homeselling Trends by Carol King