Buying real estate in Florida is not a simple process. There are several steps that you must go through before taking ownership. One of the most crucial steps is due diligence. This is when the buyer confirms that the property is what they expect it to be and is worth the value they are willing to pay. These five facts about the due diligence process will help you understand what to expect when buying real estate.
1. Pre Offer Is Possible
You don’t have to wait until after you make an offer to perform any due diligence. There are a few steps you can take to research a property before you make your official offer. This is a smart approach because it can confirm whether or not the property’s value matches the amount you are willing to pay. Analyze the neighborhood in which the home is located. Look at its history, the number of homes for sale, and published crime rates. You can look at a pro forma financial statement on the property. You can also start communicating with possible lenders to understand your financing ability.
2. Sellers Are Legally Required to Disclose Defects
The seller has a legal obligation to disclose the property’s defects to the possible buyer. This includes all material facts that could impact the property’s value and the buyer’s decision to follow through with the purchase. This disclosure must be done in writing. In addition, the seller must also disclose any recent insurance claims made on the property.
3. Buyers Can Ask for a Remedy
If the buyer discovers any issues with the property during due diligence, they can request that the seller remedy the situation. The buyer could ask the seller to pay to fix the problem before proceeding with the sale. Another option is to ask the seller to reduce the home’s sale price. That way, the buyer can pay for a remedy once they own the property. If the buyer and seller cannot come to an agreement, they can agree to cancel the sale. When this happens, the buyer’s earnest money is refunded. Whatever the buyer and seller agree to, it must be done in writing.
4. You Have Limited Time
The due diligence phase has a time limit. Generally, due diligence lasts about ten days. However, the buyer and seller can agree to a different period and put it in their contract. The binding date, or the date the contract is signed, is the start of the due diligence period. If you cannot complete all of your due diligence tasks and need more time, your real estate agent can negotiate for more time. If they can’t agree, either party can agree to cancel the contract instead. If you cancel the contract before the due diligence period expires, you can get your earnest money back. However, you may not if you wait until after the due diligence period ends.
5. Due Diligence Is Broad in Scope
You have a broad scope to research the property fully during the due diligence period. This starts with a physical inspection of the property. This expands to the neighborhood and zoning research. Environment checks will confirm that there is no contamination. Due diligence also includes an inspection of documents. This includes title, legal, and financial reviews. You can have an attorney review the seller disclosures to fully understand the scope of their claims. Finally, you can have an appraiser perform an analysis to determine the property’s fair market value.
Work With a Real Estate Attorney
Whether you are buying or selling an empty lot, residential home, or commercial property, you will go through a due diligence process. During this time, you will work with the other party to settle any issues that may arise. If you cannot come to an agreement, either of you can cancel the contract and move on.
Schedule a consultation with one of our real estate attorneys before participating in your next real estate transaction.
