Due Diligence
Due diligence is the investigation period in real estate. Learn why inspections, title searches, and document reviews are critical before closing.
Definition
Due diligence refers to the period in which buyers investigate a property before finalizing a purchase. During due diligence, buyers review the seller’s disclosures, order home inspections, conduct pest and environmental tests, verify zoning and building permits, review homeowners association rules and financials, and perform title searches. This process helps uncover defects, encumbrances, or conditions that could affect value or ownership rights. Buyers may negotiate repairs, request credits, or cancel the contract based on their findings. Completing thorough due diligence protects buyers from costly surprises after closing.
Why It Matters
Due Diligence often influences loan approvals, appraisal support, title requirements, and closing timelines. Sellers who understand it can set accurate expectations and attract qualified buyers. Buyers who learn the basics can structure stronger offers, reduce surprises in underwriting, and stay on schedule through escrow.
Examples
Example 1: A seller references due diligence in disclosures or remarks to reduce confusion and renegotiation later.
Example 2: A buyer evaluates due diligence alongside comparable sales and loan guidelines to confirm affordability.
Example 3: During escrow, due diligence appears in documentation coordinated by the lender, agent, title, or closing company.
Tips
Ask early how due diligence affects pricing, lending, or title so you can plan ahead.
Keep documents organized (reports, receipts, addenda). Clear paperwork shortens negotiations and underwriting.
Maximize reach with a flat fee multiple listingand add pro services (photos, pricing, negotiation) as needed.
Additional Context
Due Diligence connects to other steps such as offer terms, contingency timelines, appraisal thresholds, and title or survey findings. Surface questions early and document decisions in writing to stay aligned with the other party and your lender or closing company. If you are selling as an owner, pairing MLS reach with a simple checklist for showings, feedback, and offer review keeps the process efficient.
Related Terms
Home Inspection
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Inspection Contingency
The inspection contingency allows buyers to renegotiate or exit based on inspection results. Learn h...
Buyer’s Closing Costs
Buyer’s closing costs include fees beyond the purchase price—like loan origination, title insurance,...
Contingency Clause
A contingency clause is a contract condition that must be met for the sale to proceed. Common contin...
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