Step 10 to Buying a Home: What is the Due Diligence Period?
The first part of your contract timeline is your Due Diligence Period. This is also the period of time during which your earnest money is most strongly protected, because you are in complete control as to whether or not you move forward with the contract at this point.
What does this mean?
Well, during the due diligence period, the buyer has the right to terminate the contract for any reason, with no penalty. In other words, you can, technically, just wake up one morning and decide you no longer want to purchase this house.
However, this is not really the intent of the due diligence period. Typically about 10 days (though the length of this timeline is negotiable and negotiated in the initial contract negotiation), this is the period of time during which you will conduct all of your home inspections and do your due diligence on the property. The true intent is for you to have an opportunity to make sure that the home's condition is satisfactory and acceptable to you, and if it is not, it's the time to try to negotiate with the seller to an acceptable compromise, whether that means negotiating a lower purchase price, funds toward your closing costs, repairs and other concessions, or a combination of these options.
What if we cannot get the seller to agree to an acceptable compromise?
In the event that negotiations with the seller are not successful during this time -- for example, if the home inspection reveals damage that the seller is not willing to repair or compensate for -- then you have the right to cancel the contract and you also have the right to have all of your earnest money refunded to you (or released from this contract to be used for the next house you find).
For what other reasons can you terminate the contract during the Due Diligence Period?
Technically, you can just wake up one morning and change your mind. While the intent of the Due Diligence Period is to give the buyer time, with as little stress and pressure as possible, to complete all desired inspections and related negotiations on the home, this is also the time to deal with your Buyer's Remorse, if you have it. In short, it is your time to be absolutely sure this home is the one for you. While we want you to have that assurance before we write the offer, sometimes things can feel as though they move too quickly, and we understand that you may feel pressure. If you decide this property is not the right one, we need to know during Due Diligence. As long as you terminate the contract agreement, in writing, during the Due Diligence Period, your earnest money is protected and cannot be claimed by the seller. There are no stipulations to your ability to terminate during the due diligence period.