Real Es tate Weekly

with Jess Barron

What Is Due Diligence?

When purchasing real estate, it is important to know what a “due diligence” period is. This is the opportunity for the buyer to do their homework and discover information about the property they are purchasing. The due diligence period is negotiable between the buyer and seller and is part of the purchase and sale agreement.

In residential real estate, this time period is typically the first 7 to 14 days of the contract, but can be longer or shorter. This is the best time for a buyer to conduct a home inspection. Some people think of due diligence like an option. The buyer can option out of the contract without any penalty and have their earnest money returned in full.

Regarding home inspections, the buyer can use the ability to option out of the contract as leverage for concerns found during the home inspection. The purchaser may ask the seller for home repairs during this time period and may opt out of the contract if the seller does not agree. This puts a lot of pressure on the seller to handle some, if not all, of the requests made by the buyer. This is quite the change from the “buyer beware” era of real estate in the past, when there typically was no due diligence period and the buyer was “locked-in” the contract.

Home inspections are not all that is conducted during a due diligence period. In land purchases, a buyer may perform a perc test, to confirm that the soil is sufficiently permeable to water. This is necessary in rural areas for septic tanks. If the land is being rezoned, the purchaser may need a lengthy due diligence to determine if the local government will rezone the property for the intended use. For example, a buyer may want to rezone a property from rural conservation to commercial. This would require a rezoning hearing with the local governing authority. Typically, you will see several months of due diligence allowed for this process.

In the history of real estate, the due diligence period is still a relatively new concept. Due diligence is controversial to some agents as they see sellers getting taken advantage of. A buyer beats a seller down on price initially during the contract negotiation and then comes back again a few days later to negotiate again during the due diligence period. To protect themselves, sellers can attempt to sell “as-is” with no repairs.

In a strong real estate market, the seller can also use their market to advantage. If the buyer threatens to back out during due diligence, it is likely the seller will find another buyer quickly. This gives the seller some negotiation power. At the same time, it may be very difficult for the buyer to find another home in a competitive market.

MLS #20005781

24+/- ACRES ON POPLAR ROAD AT YEAGER ROAD INTERSECTION. Already zoned C-6 with water

MLS #10120310

LOTS/LAND

2 WOODED VACANT LOTS in West Coweta on East Coggins Road. Easy access to Newnan, Franklin or Carrollton. $60,000 per lot. Frank/Jess.

RESIDENTIAL LOT ON BERRY AVENUE IN TOWN. All utilities available. $29,900 Frank.

LOTS/LAND

12 CHOICE BUILDING LOTS in Grantville. Easy access to I-85, Atlanta, Newnan, LaGrange and Columbus. Sold ‘as is’. $420,000 Bulk Sale Only. Frank/Jess.

AMLAJACK 255.5+/- ACRES WITH HALF MILE FRONTAGE ON I-85 between 2 industrial parks. $17,890,600. Frank.

GREAT OPPORTUNITY IN HISTORIC NEWNAN! Level

Residential Lot within walking distance to Atkinson Elementary and Newnan High School. Build your dream home! $85,000. Jess.

CHOICE 10.13 ACRES ZONED COMMERCIAL (C-2) ON HWY 74 (SENOIA ROAD). Adjoins Georgia World of Beverages. 579’ frontage on Hwy 74 and additional frontage on Landrum Road (385’+/-). $3,500,000. Frank