Due Diligence In Real Estate – What Is It?

Buying or selling a house is stressful and always has some inherent risks whether it is a single family home, a condo, mobile home or a multi-family building. You will always hear the term “Do you Due Diligence” from people when you are buying…..but what does that really mean? What is Due Diligence in Real Estate?

Definition Of Due Diligence

Due Diligence is basically “Doing Your Homework”. It means taking caution, reviewing documents, taking measurements, talking with your insurance company and walking the property. The truth is, there is no easy way to do your due diligence. It takes time and most people don’t really know what to do. So I broke it down to show what it means to you and steps to follow.  Below are the seven parts of the Due Diligence section of the NH Purchase and Sales Agreement.


Restrictive Covenants Of Record

Restrictive Covenants are defined as “a covenant imposing a restriction on the use of land so that the value and enjoyment of adjoining land will be preserved.”

You need to review the documents to make sure you are comfortable with them. Some examples of restrictive covenants are “Cannot park RV in driveway or yard” or “Cannot run an in home business from the property”.


Easements Of Record/Deed

An Easement in a deed allows another party other than the homeowner to use a portion of the land. Common easements are to allow the utility company access. Other easements may allow the home behind you the use of your driveway to access their home. Read through the deed and easements of record to make sure you are comfortable.

Park Rules and Regulations

If buying a mobile home in a park, there are rules and regulations that you need to be aware of. Read through them and make sure you are comfortable.


Condominium Documentation

There is a lot of research to do before buying a condominium. A condominium is a self-governing entity, which is recognized legally by the state. The condominium board of trustees is supposed to manage the property according to the “master deed” and “bylaws,” collectively referred to as the “condo docs.” Each condominium association has its own rules and bylaws, although there are often similar elements. You need to look through the rules, regulations, bylaws, budget and meeting minutes to make sure you are fully confortable with how the association is run and can live peacefully.


Co-Op/PUD/Association Documents

In a Co-Op, the corporation owns the land and the buildings. You are buying shares of the corporation. A PUD is a Planned Unit Development where the buyer owns the home, the land beneath the home and sometimes land around the home. Make sure you read through all of the documents carefully to ensure you are full comfortable.


Availability Of Property/Casualty Insurance

Insurance is a cost that you have to be aware of when buying a home. After the offer is accepted, you need to call your insurance company and make sure the costs to own are within your budget.


Availability And Cost Of Flood Insurance

When you call your insurance company, they will let you know if the home is in a flood zone and what that cost would be. Finding this information out early is crucial. You do not want to be surprised if the home is in a flood zone and the costs is $1,000 per month.


Bottom Line

So Due Diligence is your time to do your homework. If at anytime you are uncomfortable with any of these items, you contact your Realtor and you can back out of the contract and get your deposit back. Just as important, if you do not receive this information within the due diligence period, you and your realtor have two options. You can either extend this section of the contract until you do get the info of you can back out of the contract and get your deposit back.

As with any other part of a purchase and sales agreement, it is VERY important to adhere to the Due Diligence dates.

Your real estate agent is the best source of information about the local community and real estate topics. Give Kevin Cooper a call today at 603-657-6787 to learn more about local areas, discuss selling a house or tour available homes for sale.






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