Dale 'Kent' Shaw

Dale 'Kent' Shaw

DRE#

Due Diligence - Satisfying Contingencies

 

 

 

Due Diligence - Satisfying Contingencies

When all terms of the transaction have been negotiated, and the signed, executed purchase agreement has been delivered to all parties, you are "under contract".  At that time the due diligence period begins subject to deadlines in the purchase agreement and all contingencies must be satisfied before closing on your new home.

You can expect around 45 days to complete your due diligence, receive final approval of your loan and satisfy all other contingencies.  Be aware of all deadlines contained in the purchase agreement, including the closing date.  One important standard provision of the purchase agreement is that "time is of the essence".  If it looks like you might miss a deadline, an extension might be negotiated with the seller, but that is not guaranteed.  It is always best to adhere to the contract deadlines, otherwise you will be in default of the contract terms which might mean waiving important contingencies (eg. negotiating repairs) or even losing your earnest money deposit!  As your Realtor® representing your best interest, I will keep you informed of upcoming deadlines and help you avoid the pitfalls and landmines throughout the process.

It is your responsibility to thoroughly investigate whether the property meets your intended use.  Many of the following items will be addressed through contingencies and your choice of inspections plus online resources are available.  Items to be investigated if they concern you include, but are not limited to: current or future value; future derived income; school districts; condition and square footage of any improvements; lot size or acreage; lot boundaries; permits, zoning, or code compliance; adjacent property zoning; physical and legal access; burden or benefit easements; soil conditions; water rights; location of utility, sewer and water lines; availability of utility services or the possibility of extending improvements (paving, sewer, water, utilities, access); crime history in the neighborhood; the existence of registered sex offenders or other convicted criminals residing in the neighborhood and surrounding areas; the presence of any structures, businesses or activities conducted in the area that, in your opinion, affects the value and/or desirability of the property.  I will disclose any adverse material facts that are known to me but ultimately the responsibility is yours.

Contingencies

Most purchase agreements have contingencies — provisions that must be met, subject to deadlines, before the transaction can be completed, or the buyer is entitled to walk away from the deal with their earnest money deposit (EMD).  Below is a list of common contingencies that must be satisfied by their deadlines in order to complete the purchase of your new home:

  • Home inspections — you will have a set number of days after the offer is accepted to complete inspections of the property with licensed or certified inspectors.  If inspections reveal something is wrong with the house, you can request the seller make repairs - but most repairs are negotiable; the seller may agree to some, but say no to others.  Or the seller can offer a price reduction, or a credit at closing, based on the cost of the repairs.  Just remember to keep your eye on the big picture.  If you and the seller are bickering over a $500 repair to the hardwood floors, keep in mind that’s a drop in the bucket in relation to the price of the home.  This is another instance where I can offer real value and counsel you on what you might ask the seller to repair.  Click the following link for a list of common inspections: Inspection, Warranty Information. (These are the most common inspections in our market but this list is not intended to be all inclusive.)

  • Seller's Property Disclosure — The seller is required by law to disclose any known adverse material defects to you.  Most sellers will provide a form for your review that details any current property issues and a history of updates or repairs while they have owned the home.

  • Financing — gives you a specified amount of time to get final approval of your loan to cover the mortgage.

  • Appraisal — a third-party appraiser chosen by your lender evaluates the fair-market value of the home to ensure the home's value is sufficient collateral for the value of the mortgage.

  • Title — the title company verifies that the seller can legally convey ownership to you without liens and if title insurance can be issued to you, with or without conditions.  I strongly recommend that every buyer should have title insurance.  The title company will also provide a chain of title and the Covenents, Conditions & Restrictions (CCRs) of the subdivision for your review.

  • Homeowner's Insurance — You apply for and determine if you are able to obtain a quote at normal and customary premium rates and seller’s claim history has no impact on your insurance in the future.
  • Survey — The survey will identify lot size or acreage, lot boundaries, location of improvements, encroachments and easements.  You have a choice of ordering a new survey or accepting an existing survey subject to approval of the title company and lender.

  • Property Tax — You can review an estimate of the property taxes based on the list price of the home.

  • Buyer's sale — where the transaction is dependent on the sale of your current home.

  • Lead-Based Paint — If the home was constructed before 1978, the seller should disclose any actual knowledge or reports of the existence of lead-based paint.  LBP inspectors are available.

  • HOA/Condo AssociationIf the home is located in a Homeowner's or Condominium Association, you will receive a disclosure of the association's financial health, benefits and dues.

  • Public Improvement District (PID) — If the home is located in a PID, you will receive a disclosure of the amount and duration of the payments required.

  • Well/Septic SystemIf the property contains a well or septic system, the state requires they be inspected before a change of ownership can occur.

 

https://www.realtor.com/advice/buy/questions-to-ask-a-home-inspector-and-when/



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