The “Due Diligence” period begins upon the execution of the purchase agreement and runs for a set amount of days that are negotiated prior to the execution of the contract. During this time period, Buyers will have all property inspections completed, appraisal performed, bank loan approved, and any repair costs negotiated.  While a Buyer is within their “Due Diligence” period they may decide to terminate the purchase contract for any reason at all and receive back any “Earnest” or “Good Faith” money they had put down to secure the property. This is the time for the Buyer to negotiate any changes to the contract based on the results of their due diligence and to make their final decision whether to move forward. However, once the “Due Diligence” period has passed, If the Buyer were to decide to back out of the contract for any reason at all then the “Earnest” or “Good Faith” money may be released to the Seller as liquidated damages. 

This makes it critical for Buyers to know before making an initial offer how much time they will need to get inspections completed, repairs negotiated, and meet all the bank’s requirements to secure their loan. In our experience, very few buyers have the knowledge necessary to make this decision without the assistance of an experienced real estate agent. A good local agent should know how to advise you based on your circumstances. They should know how long different types of inspections may take and what loan requirements may hold up the process. 

If you will need or wish for an extended Due Diligence Period then the Seller may ask for a separate “Due Diligence” fee. This fee is not additional “Earnest” or “Good Faith” money.  The fee is negotiated between the Buyer and Seller as a way to compensate the Seller for allowing the Buyer additional time to complete their due diligence. The amount of additional time and the amount of the fee negotiated will often depend upon the local market. In a hot market where properties sell quickly the fees may be higher. In a market where properties languish on the market for months, the fees may be lower or non-existent, as Sellers may not want to risk loosing a Buyer with little chance of another offer coming in soon. A negotiated “Due Diligence” fee is payable directly to the Seller at the time the purchase contract is executed. The good news for Buyers is that the “Due Diligence” fee will be credited back towards the purchase price if the Buyer completes the purchase. For more information regarding this topic please call us and speak to one of our great agents!

Joe Chamberlain
Mountainscape Realty