What is Due Diligence?
Due Diligence is the process of researching information about a particular situation before entering into any agreement to buy or sell. One of the most common scenarios where due diligence is performed is in a real estate transaction. The lack of due diligence can really cost you in the long run.
What is the Due Diligence Period in Real Estate?
The due diligence period in real estate is usually 10 days. This allows the buyer enough time to do the research on the property and decide whether or not to continue with the transaction.
Can a Buyer Back Out During the Due Diligence Period?
A buyer can back out of a contract for any reason during the due diligence period.
Why Do We Need Due Diligence in Real Estate?
At first, every seller that’s motivated seems to feel like a good fit for your real estate wholesaling program. Sometimes there’s more to the story that can really affect the overall picture. Typically the seller only gives you the facts that they want you to know. Some of the important things that will affect the transaction monetarily are left out. That’s why it’s up to you to do your own due diligence in every real estate negotiation before making any offers.
We have a little more knowledge about the real estate closing process than the average seller. If you don’t communicate and explain to them how it’s all gonna go down, you may find yourself with a little challenge at closing (sellers don’t like surprises). NEVER ASSUME that the seller agrees to pay for ANYTHING! and never assume that because it’s in your contract, that they agreed to it!
Be sure to discuss all of the financial details with your sellers, so they know what to expect at closing. Here’s a special message from the Property MOB about doing Due Diligence Real Estate.
This negotiating tip could save you a deal in the future. When you make an offer to the seller for cash sometimes they assume that that’s going to be cash in their pocket after everything is paid off. They’re not all familiar with the process and how it works. Do as much due diligence as you possibly can in the beginning so that you know what you’re working with.
Here are a few things to check for during your due diligence real estate phase:
- Delinquent Property Taxes
- Code Violations
- Nuisance Leins
- HOA Fees
- Other People on the Title
- Zoning Changes
- Pending Foreclosures
If you’re nervous about entering into a real estate contract with a seller, but still want to learn how to wholesale real estate, then check out our coaching program! We’ll help you build the confidence you need to get out there and take control of these deals.