What is Due Diligence when Buying a Home in Phoenix Arizona?
You and your Realtor work hard found your dream home. After back for forth of negotiations and counter offers, seller finally had accepted your offer. Now what, you may ask. Many first time home buyers have little idea of what they need to do after their contract is accepted. On of the contingencies when buying a home is subjected to a “due diligence” or inspection period, when a buyer is able to cancel or terminate the contract and get their earnest money back. Due diligence refers to a buyer’s investigation of the various aspects of a property.
When will you complete your due diligence? Before your offer or after?
Per Arizona Residential Purchase Contract, buyer’s due diligence periods is 10 days after contact is accepted, but the length of the due diligence period is negotiable. During this 10 days inspection periods, it is Buyer’s responsibility to find out all information and conditions of the house. On top of that, Buyer also investigate the surrounding area such as school district, environmental and other things that are important to buyer. The Golden Rule of Due Diligence: You should confirm for yourself anything that is important to you. Do not rely on what the seller or the real estate agent may have said. If it is important, you must confirm it for yourself! It is the buyer’s responsibility to conduct their own research during this period and to verify all information.
Here are some of the basic due diligence tasks you should expect when buying a home.
Review the Seller Property Disclosure Statement (SPDS)
In Arizona, most seller must provide the buyers with a completed Seller Property Disclosure Statement. In this form, seller will disclose what the seller knows with seller’s knowledge about the property. The purpose of SPDS is if the seller has specific knowledge of any material facts that could affect the value of the home, he is required to disclose them.
Perform Home Inspection and Follow Up the inspection
Getting home inspection when buying a home is often the best money you will spend. A home inspection is an all-encompassing visual examination of the condition of a home. The home inspector job is to find out everything that goes wrong with the property. I always advise my buyer to meet with the home inspector at the end of the inspection. The inspector will go through all the findings, especially there are “must fix” items before closing.
Wood-destroying Organisms Inspection
Also known as termite inspection, which many lenders will require if you buy a home with financing, This inspection looks for wood rot in the structures of the property caused by termites, other insects, or water damage. This often includes the exterior, garage, and even the interior walls and baseboards.
Review Owner Title Insurance
When you buy a home, you will get a owner title insurance policy to insure your ownership. Owner’s title is a legal document that asserts that the property is free and clear of any defects in ownership, liens, or title claims. If there is any lien, the lien have been paid in full prior to the closing. For example, if a previous owner had a new roof installed, but never paid the contractor, the contractor could attach a lien on the property that would have to be paid in full before the property could be sold.
Order Homeowner Insurance
During this 10 days inspection period, you might also want to contact your insurance agent to order the homeowner insurance. You want to order during this period is to make sure the home is “insurable” and the cost of the homeowner insurance.
Check HOA CC&R and Finances
Many homes in Phoenix area are subject to a Homeowners Association that propose and enforce rules for the subdivision in an effort to protect the appearance and values of the community. It is essential to review the HOA’s financial documents to confirm that it is in good financial health and well managed. Another important document is HOA Covenant, Conditions and Restrictions (CC&R). You want to review the CC&R to see there is any restriction such as no over night parking on driveway and etc. It is also important to make sure that you have a firm understanding of the bylaws of the homeowner’s or community associations and that you know what the annual or monthly required fees are and what services are included in those fees.
Check Out the Neighbors and Neighborhood
There is no cure for the proverbial “Bad Neighbor”, other than to move away. So do what you can to make sure there is no Bad Neighbor. Drive around the neighborhood one in the morning and another in the evening, to get a feel of the traffic. Look around, does the home next door look like a junk yard, or a dog kennel? Knock on some doors and introduce yourself and talk to your future neighbor.
Confirm the House Works for You and Your Family
Take some time to fully imagine yourself living in the home. Does the house work for you? For example, does your car fit in the garage? Will you be able to tolerate the highway noise nearby? Once you close and move in, it is too late to discover something about the house that doesn’t work for you.
Also read:
What is earnest money when buying home in Arizona?
What is a Contingency when Buying a Home in Arizona?
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