(WHEW!) You finally got an offer accepted. It’s the third home you have written an offer on. The other two had offers competing with yours, and your strategy of offering 3% under list and asking for 3.4% in paid closing costs just wasn’t working! But now, you have your ducks in a row. You have your pre-qualification letter in hand, you have your checkbook in your car in case you have to write an earnest money check, and you have a better understanding of this Seller’s Market. Most importantly, you are now experienced enough to make a decisive offer based on nearby comps and days on the market.
And amazingly, your offer is finally accepted. OMG! What now?
Now, you do your homework. While your professional inspector is at work, you do your own analysis. Will you be able to adapt this home to your life? Will it be a good investment? Has it held up to a look under an inspector’s proverbial microscope (remembering that you may not be purchasing a new home that is supposed to be in perfect shape), or have fatal flaws appeared?
A Due Diligence period, usually 10 days, is the time to cement your thinking, with a good base of information. Sometimes, if problems become apparent that would have to be fixed before you would finally commit to the purchase, you can ask the seller to fix those problems. Remember that if you are purchasing a previously owned home, you don’t get a punch list like you would in new construction! You also have the option of terminating the contract, at your sole discretion. If you do, everyone signs a one page form, and your earnest money is returned to you. It usually takes about a week.
Yes, you are out the cost of the inspection. But you have to consider expenses like that a cost to do the business of real estate. Choosing the right property can mean investigating more than one, and those investigative services aren’t free.
A word of warning: once the Due Diligence period expires, your earnest money becomes part of the money you will need to bring to closing. You may have another contingency that will allow it’s refund — like a financing contingency for example — but those contingencies can expire too. Does it happen that a buyer decides to walk away from a contract and loses his earnest money as a result? All the time.
The more frenzied the market is, the more both buyers and sellers need to pay very close attention to the deadlines that allow or disallow the refunding of earnest money by the real estate broker or law firm (note: not agent) who holds it.
So remember: Ducks-in a-row, Analysis, Getting Out or Staying in.
Interestingly enough, contracts really don’t usually fail through the Due Diligence clause. Having the right agent to negotiate for you, and keep you on track, can make all the difference.