In a sellers’ market, where buyers feel fortunate to find a home that meets their family’s needs, buyers must resist the temptation to waive any part of the due diligence process to secure their purchase. The due diligence portion of a standard residential Realtor sales agreement (Oregon Real Estate Forms) offers the buyer a window of time during which experts and inspectors may scrutinize any of the subject property’s elements. These elements include, but are not limited to the home’s structure, plumbing, electrical systems, and appliances.
The importance of due diligence in home-buying
Due diligence also includes a review of the preliminary title report, as well as property disclosures provided by the seller as a part of the agreement. Once the inspection reports are in-hand, the buyer has what they need to better understand the home they are purchasing ‘as-is,’ and if they have reserved the option, to either proceed with the purchase or terminate the transaction.
Don’t “buy” yourself short
In today’s market, buyers are often in competition for the same home, so they are counseled to present a strong offer to prevail over competing offers. As a result, I have seen buyers minimize their due diligence time frames, or even decline the opportunity for onsite inspections as part of the purchase process, in hopes that their offer will be most attractive.
This is a dangerous and extreme gesture which easily could result in the buyer incurring thousands of dollars of unforeseen expenses during their first year of ownership (e.g., the roof doesn’t make it through the first winter and starts to leak). In addition, when this buyer is ready to sell the home years later and the next buyer includes due diligence as a part of their purchase, the new inspections could reveal significant deficiencies in the home (e.g., undiscovered defective exterior siding that continued to absorb moisture for years) that could jeopardize the sale or minimize the realistic sales price. It is for these reasons that I recommend pursuing inspections in your offer to a seller, and writing the offer providing respectful and realistic boundaries.
How to do due diligence right in real estate
Remember, the seller has removed their home from the market to wait for you to complete your inspection and procure your funds to complete the purchase. So, sellers will expect the due diligence period to be within a reasonable time frame, usually 10 to 14 business days. Every effort to be timely will instill ‘good faith’ in the process.
Now, you might think that thanks to due diligence, the discovery of necessary repairs or deferred maintenance would terminate many sales, but this is very seldom the case. Typically, once a buyer has their inspections in hand, they reach out to the seller and request remediation for those items of which they were unaware when they agreed upon the purchase price. To get through these repair negotiations successfully, buyers also must have reasonable expectations.
Recognize that the home is likely a ‘used,’ pre-owned home. It is unrealistic to think that the seller will bring the home back into like-new condition for you before you buy it. It is also inadvisable to try and negotiate items that were apparent at the time you viewed the home (e.g., carpet replacement), as these should have been built into the initial offer. Focus instead on the items of legitimate concern. These would include elements such as safety issues, electrical, plumbing, dry rot or structural deficiencies.
Ask your Realtor
When working with a reputable Realtor, the Offer to Purchase forms that they provide will include an opportunity for due diligence. For expert counsel in your next real estate negotiation, contact me. I’ll be happy to help you make the best home investment.