Due Diligence Explained

In the purchase and sale agreement, due diligence is an agreed upon amount of time where the buyer may inspect the property and review important information prior to closing on the property. During this time the buyer can visit the property and perform inspections as well as have the ability to back out of the contract without defaulting on the agreement.

Details involving real estate due diligence vary from state to state. In Maine, there is no guaranteed due diligence period unless it’s agreed upon within the purchase and sale agreement. This means that if the buyer would like to perform due diligence prior to closing then it has to be negotiated within the purchase and sale agreement.

Although it often advised to have a due diligence period, submitting an offer without any due diligence can make an offer stand out among others. In a multiple offer situation, sellers will often accept a lower offer if it omits due diligence. This is because while due diligence lowers buyer’s risk, it heightens the risk for a seller’s home to fall out of contract consequently increasing days on market and possibly lowering their sale price.  Sometimes during a competitive market, buyers will use due diligence as a time to simply think over their purchase by themselves or with family and will sometimes get cold feet due to no fault of the property.

So to recap, due diligence is a negotiated amount of time for a buyer to make sure their purchasing a solid investment but will sometimes make an offer less appealing to a seller.

If you are interested in buying or selling real estate, please don’t hesitate to reach out. I’m happy to help!