What is the Due Diligence Period?
It is an agreed-upon period of time during which the buyer can investigate the property and the transaction contemplated by the contract, terminate the contract for any reason or no reason, and receive a refund of any earnest money deposit.
How long should the Due Diligence Period be?
The length of the Due Diligence Period is entirely negotiable between the buyer and seller. There is no “standard” Due Diligence Period. The Due Diligence Period should be of sufficient length to permit buyer:
• to conduct any desired inspections/investigations of the property.
• to complete any negotiations for repairs/improvements in which the seller may be willing to engage.
• to pursue qualification for any loan the buyer may obtain, taking in to account the time needed for an appraisal to be completed and for the lender to provide sufficient information for the buyer to decide whether to proceed with or terminate the contract.
• to be reasonably satisfied that closing on any other property the buyer needs to sell in order to qualify for a new loan or to otherwise complete the purchase of the seller’s property will take place prior to the Settlement Date of the Contract with the seller.
The length of the Due Diligence Period is also typically influenced by the amount of the Due Diligence Fee.
Is there still a Due Diligence Period if the Due Diligence Fee is zero or there is an “N/A” inserted in the blank?
Yes. There is nothing in Form 2-T that makes the buyer’s right to conduct Due Diligence dependent on the payment of a Due Diligence Fee
Paragraph 1(i) of the contract contains a waiver by the seller of any right to deny the buyer’s right to conduct Due Diligence based on the fact that the buyer hasn’t agreed to pay a Due Diligence Fee.
Who is responsible for the costs of investigating the property?
The buyer is responsible for all costs associated with pursuing qualification for any loan and the costs of any desired tests, appraisals, investigations, examinations, and inspections that the buyer deems appropriate, including costs of inspecting any repairs/improvements that the seller may agree to make.
Responsibility for any costs associated with putting a pool/spa in operable condition so that it may be properly inspected, and any costs associated with any necessary re-winterizing of the pool/ spa following any inspection(s), may be agreed on by the parties.
What if the buyer is not satisfied with the results of their investigation?
If the buyer is not satisfied with the results of the buyer’s Due Diligence or the progress of repair/ improvement negotiations, the buyer is strongly advised, before the end of the Due Diligence Period, to enter into a written agreement with the seller to extend the Due Diligence Period or terminate the contract.
Form 4-T may be used to extend the Due Diligence Period. Form 350-T (or 351-T for vacant land) may be used to terminate the contract.
The seller is under no obligation to extend the Due Diligence Period. Time if “of the essence” regarding the expiration of the Due Diligence Period.
If the buyer elects to terminate the contract, it is very important that written notice of termination be delivered to the seller/listing agent before 5 PM on the last day of the Due Diligence Period.
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