Due Diligence: What Buyers Need to Know
Today we’re taking a look at Due Diligence. What is it and why is it important? Due Diligence keeps you from buying a home “As is”. No one wants to make the mistake in buying a house that has lots of defects that you never knew about, costing you thousands of dollars.
Transcription:
It’s David Pestana with Rise Utah Realty today I want to share with you some important information if you’re looking to buy a house especially during the inspection period are what we call the due diligence because no one wants to make a mistake in buying a house that has lots of defects that you never knew about and you find out later it could cost thousands of dollars. OK. So you’re looking to buy a house inside the Utah real estate purchase contract here which I have my hands. There is a section called due diligence. In fact it’s in Section Eight point one. Open it up here and in section in this section it gives the buyer the right to to accept or reject due diligence, due diligence is basically saying hey I will I trust to you that the house is great but I want to verify most of the time I would I would say all the time I want people to to do due diligence on a house. The reason is is if you close on the house without doing due diligence you buy it as is. You know that term as is means hey look the seller is not going to repair anything after the close. So you have to know what you’re getting into. So you don’t want to find out that there’s mold in the walls afterwards because that could cost you a lot of money. So in this section eight point one of the contract there outlines a lot of things that you could do in order to clarify what you have access or right to do. It’s listed there and in Utah we also have another sheet which I have here which is called the buyer due diligence checklist as realtors we share this with our clients so that they know all of the options that they have. There’s actually 20 items listed here. Now do people do all 20 usually not. It’s not always necessary and it’s very expensive. Now speaking of cost. Most people don’t do a lot of due diligence out of sheer cost of doing it. So let me give you an example. You can hire usually the first place to start is hiring a professional home inspector. What they do is they’ll check out the house and then make additional recommendations. But even those home inspectors have different levels you know so you could pay 250 bucks on the cheap side for home inspector up to fifteen hundred dollars to get that home inspected depending on the size and the scope of it. So some of the basic things that they’re going to look for is obviously leaks and damage to the house outlets electrical very visual things but there’s a lot of things that they can’t see. Like mold. So unless it’s it’s like on the shower you could there’s definitely mold there with sometimes mold is within walls from let’s say a leak that’s been going on inside the walls of the house. So hiring a mold air tests for that going to take a couple of days and I’m going to cost you more. Also in Utah we have something called radon. Radon is and nerve gas that in high concentrations they say over time could potentially cause cancer. So they are they also say that it’s present in about a third of all houses. So it is fairly relevant out there but most people don’t do that why. Because it’ll cost you usually a hundred fifty bucks to get it tested and a couple extra days. So depending on what you want to do you want to at least be aware of your options and know that doing due diligence takes time and it takes money it’s an investment because you don’t you don’t want to make a mistake when buying a house because afterwards it is as is as it says in the contract. But usually start with a home inspector and then based on their recommendations you can proceed from there. Now another question I get asked is Well how much time should I request for my due diligence period within the Utah real estate contract. On the very last page of the contract. Let’s see here. Opening it up Section 24. There is a section here with deadlines. Those one of the deadlines is seller due diligence deadline. Oh sorry there is a seller due diligence. It’s the buyer. The due diligence deadline as well the buyer. That’s where we define how much time you’re going to get to inspect the house. Normal homes take about two weeks to inspect larger homes especially commercial properties you’re going to use a lot more time than that. But think through it if you’re going to do a lot of test you may want at least three weeks. But the key is to get going as soon as possible as soon as you get on a contract. Get those things ordered. One of the biggest mistakes that people make is they’ll order the home inspection like a week after it starts and they only have two weeks. So the trouble is that you get the home inspection back the day before your due diligence expires. Now you’re rushing to ask the seller to probably repair things and if they’re not fast in repairing it you could expire when you didn’t have to. OK so actually I just had that today. It’s it’s in the afternoon right now and I got an email from the agent at ten thirty last night and their due diligence is expiring at 5:00. I’m the listing agent. They’re asking What can we do to fix things. OK. And they didn’t put it in addendum. They did it in an email. So officially it’s not official. And and it’s just last minute where they put themselves. They put their buyers in a bind and they expect the sellers to respond quickly. So don’t do that. Try and get things done early so that you have time to negotiate these items. And just so you know you can negotiate them all repairs are negotiable and usually what you can do is you could ask them to fix it. You can. That’s before closing. If they don’t want to fix it you could ask for credit so they can either reduce their price or pay for your closing costs in lieu of that. Or if they don’t want to do anything they’re not willing to compinsate you, you have to analyze whether that’s really really important to you and you can just cancel at that point and move on to the next property. Now one of the things that’s required of the seller is to give you what’s called a seller property condition disclosure. So the seller’s responsibility is to give to you this disclosure and tell you everything that they know that’s wrong with the property. All right. Here’s the disclosure form. Here’s my notes on it to this disclosure again is going to go through everything that the seller knows about the property from water damage to mold to roof to the yard to what services they use. It’s all listed in here to their appliances etc. termites structural damage soils etc. It’s a fairly lengthy report here. And you sign this as a buyer. So the seller sends it to you and then you sign it that you signing it doesn’t mean you agree with it. It’s just acknowledgement that you’ve received it and it’s it’s the seller telling you everything that’s wrong. And if they fixed it and it’s part of their disclosures they’re also going to send to you HOA documents. Any leases Exc. So with all this information that you get you have to decide whether it’s right to go forward if you feel comfortable if you don’t. How can that be remedied. And if you really don’t then cancel so that’s due diligence from a buyer perspective. I hope it’s been helpful. It’s kind of a very quick rundown. But just know that your real estate agent will help you walk through this and it’s going to cost you a little bit of money but it’s important that you spend that money so that you feel good about the purchase. And even though the seller is often telling you everything they know sometimes they don’t know everything about their own house including things that may be broken that need to be fixed. Thanks for watching and remember to subscribe. And as always call us if you had any real estate needs. We would love to work with you. Thanks. Bye.
