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
Everything you learn about a house, you learn on a clock. Once the window closes, the roof, the septic system, and the unpermitted basement bedroom become your problem and your bill. In Washington the seller's Form 17 disclosure carries its own three business day rescission right, and that right disappears if you sit on it.
Examples
Records show the seller's 1998 deck addition was never permitted, and the county wants a retroactive permit plus an engineering letter: $3,800 and six weeks.
A title search on a Kitsap County property turns up an unreleased $22,000 contractor lien from 2019 that has to be cleared before the deed can record.
HOA financials for a Bellevue condo show $180,000 in reserves against a $1.1 million roof bid, which is a special assessment waiting to be voted on.
Tips
Read the reserve study and the last 12 months of board minutes before you read the CC&Rs. Pending litigation and deferred projects surface in minutes first.
Order the sewer scope separately. General inspectors do not put a camera in the line, and a collapsed clay lateral in an older Seattle neighborhood runs $8,000 to $25,000.
Calendar the Form 17 three business day rescission window the moment the disclosure lands in your inbox, and treat it as the hard stop it is.
Related Terms
Encumbrance
An encumbrance is a claim or limitation on property rights. Understand how liens, easements, and res...
Escrow
Escrow is a neutral holding arrangement for funds or documents. Explore how escrow protects buyers a...
Inspection Contingency
The inspection contingency allows buyers to renegotiate or exit based on inspection results. Learn h...
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