Buyers and sellers may negotiate a due diligence period as part of their real estate contracts. Money magazine notes that the standard time given for buyers to review a property is 10 days. During this period, a buyer may back out of a contract without penalties.
As reported by Realtor.com, some sellers give potential buyers a few weeks to inspect properties for flaws and defects. If problems exist, buyers may then negotiate with sellers regarding the costs for repairs, replacements or renovations. A seller may agree to reduce a property’s sale price to help close the transaction.
The importance of property inspections to prevent harm to occupants
Without performing due diligence, a buyer may not discover serious issues that could affect using the property as intended. Hazards such as asbestos or environmental contaminants may not appear until after a homeowner, tenant or business has moved in.
A property’s environmental contaminants may cause severe illnesses in a homeowner’s family or lead to a tenant suing a landlord. Hiring an inspector to perform due diligence may prevent a buyer from acquiring a property that could lead to physical harm.
Financial considerations involving commercial properties
Buyers interested in properties intended for a commercial enterprise’s rental income need to inspect a potential unit for its financial viability. As reported by Millionacres, due diligence includes studying the location’s marketing demographics. Surrounding businesses help determine whether a property could attract valuable commercial tenants. Commercial property owners could improve their prospects for long-term profitability with tenants capable of generating enough revenue to continue renting.
Due diligence is part of a sound real estate contract. Some parties may still prefer to forgo inspections to hasten a closing. The risks of discovering severe issues after the purchase may, however, cut into a commercial or rental unit’s profit potential.