When going into a contract, there are several protections for the buyer. This post will be covering the due diligence contingency. IN other words, the deal is contingent on the buyer doing their due diligence. Due diligence is defined: Reasonable steps taken by a person in order to satisfy a legal requirement, esp. in buying or selling something.
The due diligence contingency is active for a specified length of time. This time is negotiable and can be any length that the parties agree on. The seller will want this as short as possible and the buyer will want this as long as possible. This length of time is called the due diligence period.
The easiest way to describe the due diligence period is a period of time that the buyer can terminate the contract for any reason. This is the time that you will get your inspection completed, get any additional information about the HOA you need to know, and, well, do your due diligence. In other words, discover any and all information that would cause or preclude you from buying the home.
The most common reason that someone terminates a contract during due diligence is that the inspection uncovers an issue that the seller is not willing to fix. However, as mentioned above, the buyer can terminate the contract for any reason. If at any point during the due diligence, the buyer changes their mind, they get their earnest money returned.
Don't hesitate to make an offer!
As many buyers, especially those purchasing below $150,000.00 realize, there is a lot of competition in the market right now. There aren't enough homes being listed and those that are are getting put under contract within days, if not hours. If you want to sleep on it, you won't have the opportunity to purchase it when you wake up in many cases.
So, right now, it is imperative that you put in an offer as quickly as possible, and use the due diligence period to fully investigate it and ensure you want to go forward.
Word of caution:
Some REO companies do not allow for due diligence, they have an inspection period. These are a bit more restrictive in the reasons you can terminate the contract. However, these companies move slowly in responding. You won't have signed contracts for a few days. Until the contract is signed, it is not binding and you can terminate.
No one wants to rush the decision to purchase a home. It is a huge purchase and you want to be sure that this is the home for you. That said, you absolutely cannot handle these decisions the way we have traditionally handled them. You can't 'think about it'. You have to act. Be decisive and know you have protections if you discover something that makes the house not work for you.
Oh, and of course, make sure you have an agent that knows how to protect you, and someone that can explain all the contingencies.
Happy Hunting and good luck!