Due Diligence

Due Diligence
by Teresa Larson Village Real Estate, Murray Utah
30+ year’s real estate experience
Sept. 15, 2014, updated March 27, 2018,  updated March 20,2021

Once you get into the nuts and bolts of seriously looking into purchasing a home the term due diligence surfaces. This it is something worth understanding for both the buyer and seller.  In Utah and likely other states buyers are given the chance to have a period when they can explore things about the future home they are purchasing. Before you begin the due diligence that is being referred to here you should have a contract in place on the home.  The contract will show a date that you need to have your due diligence done by.

What is Due Diligence?

A buyer approves the sellers disclosure and conducts inspections to satisfy the value offered to the seller for the property. In our Utah real estate purchase contract due diligence is listed as;  approval of the contents of the Seller Disclosures and any other tests, evaluations and verifications of the Property deemed necessary or appropriate by Buyer, such as: the physical condition of the Property; the existence of any hazardous substances, environmental issues or geologic conditions; the square footage or acreage of the land and/or improvements; the condition of the roof, walls, and foundation; the condition of the plumbing, electrical, mechanical, heating and air conditioning systems and fixtures; the condition of all appliances; the costs and availability of homeowners’ insurance and flood insurance, if applicable; water source, availability and quality; the location of property lines; regulatory use restrictions or violations; fees for services such as HOA dues, municipal services, and utility costs; convicted sex offenders residing in proximity to the Property; and any other matters deemed material to Buyer in making a decision to purchase the Property.

Buyers Expectations and Sellers Expectations

A seller shouldn’t have to deal with a buyer who wants to bring in all kinds if experts without knowing that the buyer is serious and also a qualified buyer. In the Utah Real Estate Purchase Contract the buyer is typically responsible for any expense involved with inspections to be done on the home. A buyer is also responsible for any damage that is done to the home during inspections. The inspections should be done by knowledgeable qualified inspectors. Buyers hire home inspectors, plumbers, contractors etc. You usually start with a home inspection and the home inspector might suggest some additional inspections.

Prior to a Contract and Due Diligence

Before making an offer on a home the buyer should at least feel comfortable with the area and have some knowledge of the surrounding amenities such as shopping schools, convenience to mass transit, work and other important area information or criteria that is important to the buyer. This avoids wasting the seller’s time if these things become a concern.  Due diligence is more specifically related to the condition and workings of the home.

Sellers Disclosure Statements and Inspections

These are part of the due diligence period in our Utah real estate purchase contracts. A seller will provide a sellers disclosure statement but the standard disclosure in Utah could be considered vague by some. Sellers may also forget to include an important detail, or not think something is important to include because the problem was taken care of.  This is why a good real estate agent will recommend inspections of the home that include structural, mechanicals and the other components of the home and area conditions. These conditions might include geographic information. You could stop by the city or county planning and zoning offices and see if there is any information available about possible hazards such as earth movement in the area or flood zones. Just because the property is not on a FEMA flood map does not mean that there might not be a problem. Think about nearby water sources.

Consider Time Needed for Inspections and other Deadlines

The time frame needs to be reasonable for both the buyer and seller for the due diligence period. Keep in mind that a loan needs to be completed unless this is a cash deal. The appraisal can take up to 10 days to come in. Before the loan can be completely approved the appraisal needs to be back and reviewed by the lender before a final loan approval will be given. The appraisal will likely be ordered after the due diligence is acceptable to the buyer. Why pay for an appraisal if you find a problem during your inspections?  A seller may not want to secure other living arrangements until all of the buyers critical deadlines such as due diligence, appraisal and full underwriting approval are passed. You can see why due diligence and deadlines in a real estate contract are important and need to be carefully considered.


Utah Association of Realtors Utah Real Estate Purchase Contract approved August 27, 2008

©Teresa O Larson PC,  Sept 2014,
updated March 27 2018, updated March 21 2021