Buyer beware: Purchasing your next piece of property without a reasonably diligent inspection is risky and can be costly. The responsibility for inspecting and researching a home's condition and title falls upon the buyer. Sellers have a responsibility to disclose facts that might affect a home's desirability, and these disclosure laws are stricter in some states than in others, but the rule of caveat emptor -- buyer beware -- means you must do your own homework. Your contractual due diligence period describes the time frame for completing all property-related inquiries.
You have a duty to exercise reasonable care and diligence before buying real estate. The due diligence period gives you time to conduct a general home inspection; order inspections by exterminators, plumbers, electricians and other professionals; and research title activity and insurability. If you have a problem with any aspect of the home's physical condition or other facts about the home, you have time to address the problems. You might ask for repairs or for the seller to otherwise resolve the matter before you agree to move on with the purchase.
Most real estate purchase contracts specify a time frame for performing your due diligence tasks. This prevents a buyer from waiting until the last minute to review documents, seek financing or inspect the home. Although you can continue investigating a home's desirability until closing, a contingency period keeps you from walking away unscathed if you cancel at the last moment after discovering information you don't like. Although you can't be forced to buy a home after the contingency period, you may lose your earnest money deposit as a result.
Purchase contracts can contain many contingencies, which are conditions that must be met for you to buy the home. Common contingencies involve due diligence tasks. For example, you might make your offer contingent upon an acceptable appraised value that equals or exceeds the sale price. You would then be responsible for getting an appraisal done before the end of your due diligence period. Likewise, inspections, review of homeowners association documents, lien and title searches and confirmation that the home qualifies for hazard or homeowners insurance are contingencies.
Due Diligence Limitations
Setting contingencies and completing your due diligence in time doesn't provide warranties or guarantees, or obligate the seller to fix defects. Certain contracts may state that a home is sold "as-is," which is common among bank-owned foreclosures. Buyers agree to purchase as-is homes in their current condition, despite any flaws they may find along the way. Even without an as-is clause, sellers don't have to repair defects they disclose or that you find, unless they've already agreed to it.