Text Box:

Due Diligence is home buyer’s protection to avoid buying a lemon. Due diligence clauses set the conditions and time frames for the home buyer’s property checks and investigation.

 

 

Buying a Home

Why do You need a Due Diligence Clause?

http://klausterproperties.info/
Follow kjs2006 on Twitter

 

Avoid buying a lemon

 

You cannot expect that everything goes always as planned. Everyone makes experiences to learn from.  Buying a house is incredibly exciting but also nerve-racking. Each house that attracts your attention has its specific. How can you avoid buying a lemon? 

 

You have heard stories about “leaky homes”, buildings fail to meet building code or regulations, contaminated land, flood prone land,  missing council permits, insurance issues, problems with the Body Corporate, and the list goes on and onIt is a man made disaster when a home needs to be demolished or a dream turns into a nightmare.

 

The first level of protection is you making informed decisions and actually doing your homework when making an purchase offer. The second level of protection are the professional services you might engage to answer your requests.

 

Previously we talked about the common pitfalls when buying a property, so let us be more specific about the buying process and due diligence.

 

 

What is DUE DILIGENCE?

 

For the buyer the Due Diligence (DD) includes everything to be checked upon the  property to buyer’s satisfaction. The Due Diligence starts with putting a DD clause on the sale & purchase offer presented to the seller (vendor). If accepted by the vendor, the DD clauses set a time frame for completing all property related investigations.

 

Not only the buyer, also the seller normally performs a due diligence analysis and would not accept any buyer. When all parties are satisfied the negotiation process ends by signing an “unconditional” agreement.

 

 

Due Diligence includes

 

The buyer would specify DD clauses about a time frame and the conditions upon to be satisfied such as:

 

· Title Search

· Finding insurance cover

· LIM Report (Land Information Memorandum)

· Financial conditions such as obtaining finance

· Building inspection

· Structural engineer report, earthquake safety, land stability

· Geo-technical engineer report looking at the solidity of the ground or risks of liquefaction, etc

 

More information  - go to “How can you secure your interests as buyer?

 

 

Purchase process - Who is the driving force?

 

In most cases the seller’s agent is the driving force to put the deal on paper. If confident, you don’t need a lawyer to make an offer. The real estate agents can help with DD clauses you want, but read here more. You can easily prepare your own DD clauses. Remember, the friendly agent gets paid by the vendor. If you are unsure take professional advice from your lawyer. 

 

 

Purchase Price when going “unconditional”

 

Once the seller has signed your offer including your DD clause, then you have to complete your due diligence before the set date/time ends.

 

If satisfied, you will confirm the contract as “unconditional”. “Satisfied” means you have obtained all required papers, finance approval, insurance quotation and completed your investigation. That might include a registered valuation (RV), quotations for improvements or repairs and so on.

 

In case you obtained some quotes for repairing a defect property you would propose an adjustment  to the set purchase price. Don’t be afraid to re-negotiate a purchase price set before any building inspections.

 

 

Due Diligence Clause—Examples

 

Using a generic Due Diligence clause is not always a straight forward process. Several times I experienced that the agent or vendor was opposed to it.

 

Why and how to deal with this situation read here more.

 

 

To Top ]  [  Blog Posts Library  ]  [   Next Post   ]

Quick SEARCH

http://klausterproperties.info/

Klauster Properties Ltd.  -   Homeowner's Blog

Venture into the world of home ownership cliches

 

Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, residential properties and healthy lifestyles. 

 

The passion of making experiences available comes from renting in different countries and working with people who are interested in home ownership. Helping people to avoid pitfalls has been most rewarding, when forming relationships.

 

Our philosophy to treat life, partnerships and hobbies as an investment has helped people in our circle. Life is a dream with a deadline, happiness comes from making the right choices by having realistic expectations.

 

Come along and participate — boost your confidence!