Real Estate Lingo Defined: What is Due Diligence?

Kimberly Bean
Kimberly Bean
Published on April 16, 2018

Jim and Claire had finally found the California home of their dreams after a long, grueling search and several overheated bidding wars. They were ecstatic when their offer was accepted, and the transaction sailed to an effortless close.

Summer settled in, and it was time to crank up the air conditioner. Oddly, they couldn’t find the thermostat for it. There was one for the heater – and isn’t the cooling system typically attached to that?

They searched the entire home and came up empty. The HVAC system was missing the AC side of the equation. There was no air conditioning system in the home, despite the claims made in the MLS listing.

Who gets the blame?

It’s easy to assumer that the listing agent and/or their broker were to blame. After all, the box on the MLS listing, right there next to “central air conditioning,” was checked.

Maybe the homeowners should’ve caught the MLS mistake and brought it to their agent’s attention? If so, perhaps they’re to blame.

In the end, after mediation, the buyers were found to be at fault.

Why? Because they didn’t perform adequate “due diligence.”


Caveat Emptor

This Latin term means “let the buyer beware.” You’ve probably heard it before. Did you know that it’s part of a longer statement that admonishes buyers to “beware, for he ought not to be ignorant of the nature of the property which he is buying from another party?”

According to, there is an assumption, under law, that a buyer of any product will inspect it completely before completing the purchase. “This does not, however, give sellers the green light to actively engage in fraudulent transactions,” says, but it does put a lot of responsibility on buyers’ shoulders.

And, in this case, the mediator found no evidence that the sellers acted fraudulently.

The due diligence period

The due diligence period extends from the time the seller accepts the offer until the last contract contingency is removed. That means homebuyers are given ample time to perform due diligence, In fact, they are afforded the opportunity to ask for more time if they need it.

During this time, the buyer will have the home inspected, shop for insurance, and examine any HOA documents. At the same time, the lender will work on the buyer’s loan and have the home appraised. A title company will investigate the home’s title.

The buyer will get copies of inspection reports, appraisal information and the title search. They will be well armed with information during the due diligence period. Savvy buyers will personally inspect the home as well, which Jim and Claire did, twice.

Before the last contract contingency is removed, the buyer has the chance to negotiate with the seller for repairs or the money to have the work performed by someone else. If this doesn’t occur, and the contingency is removed, the buyers are agreeing to take the home as-is.

It’s expected that buyers will know what they’re getting into.

Jim and Claire lost their case at mediation, and here’s why:

There was no evidence that the seller exhibited fraudulent behavior. His property disclosure noted that there was no central air conditioning. The buyers either didn’t read the disclosure or ignored what was stated.

The home inspector noted the lack of central air conditioning. It’s mind-boggling that any homebuyer wouldn’t thoroughly read the home inspection results, but apparently Jim and Claire didn’t.

The buyers personally inspected the home on two separate occasions and performed an additional final walk-through before closing. While it would be too late to seek remedy after the final walk-through, the prior two inspections fall under the umbrella of performing due diligence.

Don’t let it happen to you!

Jim and Claire’s situation can happen to even the most experienced Southern Maryland homebuyer. It’s easy to be so excited by finding THE home that you don’t notice or overlook its flaws.

And while Jim and Claire’s own real estate agent should have noticed a feature that the couple told her they wanted, in the end it all came down to their negligence.

Buying real estate, even for personal use, is a financial investment. Treat it as such by forcing yourself to leave the emotions aside and approach the purchase with all the seriousness it requires.

Brandywine MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309

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