The “Due Diligence” When Buying a Home
There is no doubt that the home buying process can be pretty stressful. There are many things that you need to do to ensure you get what you want.
Many buyers mistakenly think that the buck stops when they have found their dream home and negotiated the contract. That couldn’t be further from the truth. Once you’ve signed the contract, you need to do a couple of things to ensure you get what you want and not a nightmare.
When you buy a home, the contract is subject to a “due diligence” period. Within this period, you’ll be required to investigate the various aspects of the property. If you find problems, you may be able to cancel the contract before it becomes binding.
Conducting proper due diligence beforehand will save you considerable headaches afterward. Due diligence can involve property visits, and/or discussions with brokers, and with your advisors, like financial advisors or an attorney.
So, what does due diligence involve?
Due Diligence “To-Do” List
1. Get a professional home inspection.
A professional home inspection is a necessary part of the home buying process. A thorough home inspection will uncover any potential issues with the home. Usually, it will last anywhere between two to four hours.
Inspectors will look at sidings, fireplaces, attics, stairways, the roof, decks, windows, electrical, plumbing fixtures, and appliances.
However, before picking one for the job, you need to do your homework. Look whether they have the necessary experience, insurance, and licenses. Your agent is in a position to help you in this regard.
2. Verify school district zoning.
You should take the time to independently verify the school districts for the home you’re buying. Sending your child to the right school is paramount; something that will play a crucial part in their development process.
In addition, schools can influence the value of a home, both now and in the future. Agents, many times, simply look to see the school district zoning and put those down. However, it’s not uncommon for the streets that divide school districts to change.
So you want to verify the present zoning as well as check whether there any talks of future re-zoning.
3. Review your contract, disclosures, and deadlines.
Did you really get a chance to dig deep into the property details with everything happening so quickly?
The due diligence period gives you an opportunity to double-check everything on the contract. Check major items like sales price, seller paid closing costs and contingency deadlines.
If you notice an anomaly, you have the opportunity to back out without any repercussion.
4. Double check public records.
Public records can contain invaluable pieces of information about the property. They can tell you who legally owns the property, the recorded square footage, chain of ownership, historical sales and tax assessments, current property taxes and more!
To access the public records, simply run an online search for your property appraiser’s office or county tax commissioner.
5. Talk to neighbors.
Neighbors can give you some inside information regarding the property. Depending on how long they’ve lived there, they may tell you why the current owners are leaving, great local restaurants, the neighborhood’s history and more.
You could also ask them a few important questions. For example, is there a crime problem? What are other neighbors like? Has there been any major damage to the property? However, make sure not to sound too interrogative.
6. Drive around the neighborhood at various hours.
You’ll want to see how the neighborhood looks like late in the evenings or on the weekends. Do nosey neighbors watch your unfamiliar car as you drive through the neighborhood? Is the neighborhood well lit at night by streetlights and porch lights?
Do people waive and seem friendly, or do they stick to themselves? How many cars are parked in driveways and along the street? Are they unafraid to be out alone after dark? Are your neighbors out exercising or walking their dogs?
7. Check for crime in the neighborhood.
Sure, not many neighborhoods are 100% crime free. However, some are certainly better than others. A high crime rate can point to several issues. For instance, the threat of constant break-ins, drug problems, or potential gang issues.
There are a handful of online resources to help you in this regard. Such websites include crimereports.com, crimemapping.com, and spotcrime.com. If online reporting is currently unavailable in your area, try contacting the local law enforcement.
