What is Real Estate Due Diligence and Why Should a Home Buyer Know?

What is Real Estate Due Diligence and Why Should a Home Buyer Know?

When you make an offer on a home and it is accepted by the home seller, there is a period of a few weeks to maybe even a few months (depending upon the particular property) before you finalize the transaction. In this window of time some buyers may be told to make sure they do their due diligence on the home they plan to purchase.

What exactly is due diligence in real estate? This is a term that simply means a buyer should do their homework to learn everything possible they can about the property before actually taking ownership. It is smart to know every little detail you could possibly learn before making the largest purchase you may ever make in your entire life. You want to make sure you investigate any potential problems that could be major issues before actually transferring any money over and purchasing a home. It is a way of making sure you or making a solid investment and still want to put a large sum of money into the purchase of the home.

What if a buyer finds a problem with the property during the due diligence process?

No real estate property is going to be completely perfect, even a brand-new construction home. A home inspection is one of the best ways to conduct due diligence on a property as a professional inspector will know exactly what to look for. They can determine whether an issue is merely cosmetic, or a minor issue that should be addressed, or a major safety problem that could result in a large costly fix, or become a quality of life impact on the homeowner.

If you discover any flaws with the property that are significant fixes you will have time to negotiate with the home seller who may agree to get the issues fixed or take money off of the agreed-upon purchase price so that the buyer can afford to pay for the fix.

In many areas there are due diligence laws and laws around contract contingencies. You can include an inspection contingency in your offer paperwork that will allow you to change your mind about purchasing the home without losing your earnest money or having any negative impact.

Some homework or due diligence tasks you want to check off before signing the closing documents on a home


As mentioned above a home inspection is one of the best ways to get a true in-depth look of the actual condition of the property. This will help you to assess if you are buying something in good condition or if it will take a significant amount of extra money to get the home the way you would like it. In some cases, a buyer may be looking for a fixer-upper to either save money on a home or truly make a home into something that is personalized just to their style and taste and needs. But even if you are expecting to have to do some remodeling and upgrading you still want to know what you are facing by getting a home inspection.

Title search

It is very important to make sure that a title search is conducted on the home to ensure that there are no other established legal third party “owners” on the property. The most common issue that comes up in a title search is finding a lien on the property, a third-party has staked a claim on the home because they have not been paid for work that they performed on the property. In some cases, it could be a dispute over property lines with a neighbor. All of these issues need to be resolved in order for the home seller to be able to legally transfer ownership to any buyer. In some cases, even after a title search, some issues are not found and they end up arising after new ownership. At this point the new owner is responsible for payment. In this case it is worth looking into title insurance.

Homeowner association rules

Not every neighborhood, but many around the country have homeowners associations. Each association will have its own specific set of rules that need to be followed and some rules can seem a little ridiculous or may hinder your plans for living in the home. It is good to make sure you know all of the rules for the homeowners association before purchasing a home. You will also want to make sure that is in good financial standing with a healthy reserve fund to ensure your dues are being well spent, especially in a condo community.

For more information on purchasing a home in St. George right now, including all St George area real estate, please contact me anytime.

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