Buying a Home | What is 'Due Diligence’ When Buying a Home?
Many people are unschooled about the various aspects of buying a home. The purchase of a new home is likely the largest investment most people will ever make, so it pays to learn what you need to know before buying a home. One of the home buying terms you will hear often, is “due diligence.” What exactly does that man, and where does it fit into buying a home?
Due Diligence Defined
The most basic definition of “due diligence” is getting to know something – all about something – so that intelligent decisions can be made. Doing your “due diligence” when buying a home means investigating the various aspects of the property in question and the proposed deal.
One of the most common home buying terms you may hear is a “due diligence period.” This is the timeframe between entering a contract and actually closing the purchase deal that gives time to discover any defects in or around the property that you may want addressed. Often, you can cancel the deal during this time if too many problems are discovered.
In short, doing your due diligence as a new home buyer means getting to know everything possible about the property you are seeking to purchase. Let’s break that down into manageable chunks so you can see how “due diligence” applies.
Get to Know the Neighborhood
It’s important to become familiar with the area around your prospective new home. Bad neighborhoods, shady neighbors, nearby bothersome utility installations or factories and a host of other concerns can negatively impact a property’s value. Not to mention make it a miserable place to live. Talk to other area homeowners and as many neighbors as possible for an honest appraisal of the area’s reputation.
It is always wise to learn about any HOAs and their policies that affect your neighborhood or new home. Some can be very beneficial and keep property values high; others can be like living in a dictatorship. HOA fees, restrictions, membership regulations and more should be carefully investigated and considered as part of learning all you need to know before buying a home.
Get to Know the Property
If the location seems to be a good fit (remember – “Location, location, location!”), it’s time to begin your due diligence about the property you are interested in buying. A walk-through with the realtor and/or owners is a good place to start, but don’t expect to learn everything you need to know. Sellers often use this to “put their best foot forward” and showcase the best parts of the home. That’s nice, but you aren’t just buying the nice parts – you are buying it all. So, you need to dig deeper.
This can begin with the seller’s disclosures. Some states require sellers to disclose certain things about the house up front. For example, federal law requires that owners of homes built before 1978 disclose information about the presence of led-based paint.
Seller’s disclosures become a part of your real estate contract. According to South Carolina Code § 27-50-40, sellers must provide potential buyers a written disclosure statement that reveals any known defects about the property. The law specifies nine different areas that must be covered, if defects exist.
It is also wise to pay attention to a pre-sale home inspection report. This report will contain any discovered problems with the home, as well as recommendations for other inspections of a more specific nature, if other problems are suspected. This can include a structural inspection, destructive pest inspection, radon gas inspection and even a defective drywall inspection.
Another key part of doing your due diligence is to obtain a land survey, or a copy of one recently completed. This can prevent serious misunderstandings later, like discovering that your neighbor’s inground pool sits partially on your property.
Get to Know Your Standard Protections
A local realtor from Jeff Cook Real Estate can help you understand more about the area and what specific insurance provisions may be required. In some areas, you may be required to obtain specific flooding insurance in addition to your homeowners insurance policy. Depending on how you plan to use the property, you may need other forms of property insurance.
Obtaining title insurance can protect you from hidden title problems that weren’t discovered during the initial title search. While rare, this can happen, including such items as errors or omissions in deeds, mistakes in examining records, forgery or undisclosed heirs that may be in line for an inheritance that includes your property.
Get Professional Help When Buying a Home
Doing your due diligence before actually purchasing a property can save you from numerous costly and time-consuming headaches. Learn what you need to know before buying a home. Contact Jeff Cook Real Estate in North Charleston, South Carolina, when you need help with researching or buying a new home.