Wednesday, December 26, 2007

Due Diligence Period

money-under-magnifying-glass.gifThe 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.

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