Due diligence periods in real estate… What is it and why is it important?
Hey everyone, welcome back to our channel! I’m Lindsay, with the Wise Move AZ Team at RealtyONE Group. If you want to stay up to date on all things Anthem and Real Estate then you need to subscribe to our YouTube Channel. Pro Tip: You’re also going to want to hit that little bell icon while you’re there so that you’re the first to know when our new videos are posted every single Thursday!
As your Anthem, Arizona REALTORS® we love helping people navigate the home buying and selling process, and one big part of that is making the most of your due diligence period. If you’ve been considering a move then stick around as I take a look at the in’s and out’s of the due diligence period here in Arizona.
At the end of this post I’ll also give you access to a copy of the Buyer Advisory, because, well, as you’ll find out, this will be your bible when it comes to making the most of your due diligence period! So, stick around.
Before I start I want to give a little disclaimer. Due diligence periods vary from state to state and I’m going to stick to what I know. So, in this video, we’ll be talking about due diligence periods in Arizona and what we typically see here.
So, first things first, what is a due diligence period?
The due diligence period is a time period in which a buyer is given the opportunity to have experts inspect the property, examine the title, and review leases to determine whether the property matches the buyers’ needs. If the buyer finds objectionable conditions, they typically have the right to withdraw from the purchase prior to expiration of the due diligence period.
Long story short, this is the Buyers’ time to do all the research and inspections they want and need to feel comfortable proceeding with the purchase.
Fair warning: You may hear due diligence period and inspection period used interchangeably… even in this blog post.
In Arizona, the due diligence period is typically the first 10 days after contract acceptance. That being said, the buyer and seller can negotiate and agree on a different amount of time. For example, if you are buying a home in Arizona but you live out of state you may want to try and negotiate for a 15 day inspection period to give yourself time to travel to Arizona. On the flip side, if there is a lot of competition for the property you want to buy, you may want to offer a shorter inspection period. A shorter inspection period may make your offer more appealing to the Seller and help you win in a bidding war.
One thing I want to make very clear is that the due diligence period is not a ‘free look period’ for buyers. As a buyer this is the time for you, your REALTOR®, your inspectors, your lender, and your title company to put in some serious work to ensure you want to proceed with this purchase. Remember that during this time, the Seller has taken their home off the market. So roll up your sleeves and get to work!
Why is the due diligence period so important?
This might be obvious, but this is the time for the buyer to decide if they want to proceed with the purchase of the home without penalty. And by ‘without penalty’ I mean that the buyers can cancel the contract during the due diligence period and get their earnest money back. If the buyer cancels outside of the due diligence period because of something that should have or could have been discovered during the due diligence period there is a chance that their earnest money will be given to the Seller.
This time period is designed to allow buyers to do any research that they were not able to do prior to making an offer on the home. Of course, we encourage and help our buyers do as much research as possible before making an offer, but there are many things (like inspections) that typically can’t be done until you are under contract!
What should you do during your due diligence period?
First let’s talk about the Buyers:
Buyers, if I have one piece of advice, it would be read the Buyer Advisory. This is an incredible, FREE, resource put together by the Arizona Association of REALTORS® designed to protect and educate YOU during the home buying process. Your REALTOR® can give you a copy of this, or if you’re just SO excited you can’t wait, you can click here to download your copy. We also made an entire video on the Buyer Advisory earlier this year so feel free to check that out here. I guarantee this document will make you think of and research things you might otherwise not have.
In addition to reading and following the Buyer Advisory, we encourage you to:
- Conduct all desired inspections. We have a video coming out next month that will highlight all the inspections you should consider. So make sure you subscribe to our YouTube Channel and hit the bell icon so that you can be notified when this video is released.
- Visit the neighborhood at different times of the day. When you’re there be sure to look around, listen for any noise, and talk to neighbors.
- Practice your commute. If you can, we strongly encourage you to practice your commute at the times of day you will normally be commuting. You need to know that you are comfortable making this drive everyday.
- Read the CC&R’s & ask questions. The CC&R’s are the Covenants, Conditions, and Restrictions. These primarily come into play in HOA governed communities. It is important to know the rules in the community. If you want more information on HOAs, click here to watch our video on ‘What is an HOA?’ If anything is unclear to you, ask your REALTOR® for clarification.
- Look into everything that is important to you. If you have school aged children, investigate the schools, if you love to hike, check out the hiking in the area. If it matters to you.. research it!
Now, let’s talk about Sellers:
Sellers, I know this can be a nerve-wracking time for you. You’re worried that Buyer could find something that makes them walk away or that they’ll pick apart every little detail of your home. My best advice to you, is to try and relax during this time. There is very little you can do. You should keep your home in ‘show ready’ condition, ensure you give the Buyer reasonable access to your home to conduct any necessary inspections, and answer any questions to the best of your ability. You also want to ensure that your agent continues to market the home during this time, just in case the buyer elects to cancel the contract.
So, there you have it! I hope this video has shed some light on the importance of the due diligence period and what you can do to successfully navigate it. As promised, if you would like your copy of the Buyer Advisory, simply click here!
If you enjoyed this post let me know in the form below! See YOU, next Thursday!