I’m often asked by my clients: What is the due diligence period? It’s arguably the single most important part of a Boston condo sale. Of course everything matters but the due diligence period is essential for the buyer, the time where all of the critical research has to be completed. The the downtown condo buyer has virtually total control during this period. Emotions can run deep; buyers are presented with reports that could scare them to death, and Boston condominium sellers usually see inspection as a money grab by the buyer.
Most drama and legal issues are tied to due diligence, seller disclosures and repair amendments. To address the inspection issues, everything has to be clearly delineated. What’s the issue, who fixes it, to what standard, paid by whom, fixed by when…and what happens if it’s not? Real estate contract language matters and the most important isssues usually surface during due diligence.
During the due diligence period, anything realting to the Midtown condo that’s considered important to the buyer should be inspected. Most every buyer has a home inspection (please note if you’re buying a garden level Beacon Hill condo, or any garden level condo for that matter include a radon test).
Issues that are a concern to the buyer are noted, both sides will seek to reach a mutual agreement. For exmple; agreement for repairs or other compensation is sought, should the work not be completed during the stated time period. If something external to the condo building/complex is considered objectionable, most buyers terminate the contract as there is nothing that can be done. Negations during due diligence tend to focus on issues that the buyer wants addressed or to be compensated for.
While the Boston condo buyers control the process during due diligence, sellers aren’t completely powerless or excluded. They have significant but limited control; they have the ability to say “no”. Sellers are under no compulsion to agree to any of the buyer’s demands. They can say “yes”, “no” or seek something mutually agreeable.
Home inspections are never kind to sellers, it’s tough to look are a thick report that bashes every aspect of the home. Issues will arise that were either never noticed or not considered important, emotion has to be checked and the ultimate objective of closing the sale kept in the forefront. The urge to tell the buyer where to go has to be suppressed, usually…
- The buyer can terminate the contract at any time before the end of due diligence without penalty. Any reason, or no reason; something better came along or they changed their mind. Of course, not resolving discovered issues is most common.
- The buyer is responsible for any inspection costs including if the contract fails.
- Whatever is important to the buyer should be researched. Once due diligence ends, the buyer is assumed committed to close.
- Termination post due diligence puts the earnest money at risk.
- Sellers are expected to make the home available for the buyer and any inspectors. They are obligated to be transparent, honest and comply with all reasonable requests.
- Sellers are not required to agree with or agree to any of the buyer’s findings or resolution requests.
- All inspections, research, negotiation and agreement on issues found during due diligence must be resolved within the contractual time frame.
- If the buyer terminates during due diligence, unilateral notice is sent to the seller. The seller must sign to release the earnest money back to the buyer. The decision to terminate rests only with the buyer, the seller has no input and unless something extraordinary occurred, the earnest money goes back to the buyer.
What is the due diligence period? It is the single most important part of a Boston real estate sale. Both buyer and seller play key roles in successful negotiation; it’s critical to understand what the process entails so that both sides act confidently. Work with and lean on professional agents; every situation is unique and with experience comes the knowledge and skill to get to closing table. Because it cannot be said enough, buyers should ALWAYS use a buyer’s agent; for both new construction and existing homes. Site agents and listing agents are legally bound to represent ONLY sellers. There is NO CHARGE for buyer representation.
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