Purchasing a home or another piece of property is an expensive and often life-changing decision that should not be taken lightly. Before making such a major purchase, it is essential that you perform due diligence, which simply means you are being responsible and doing your research on the property prior to signing any documents or contracts. That way, you have full knowledge of any issues that may arise, and you can feel good about your investment.
Regarding real estate, performing due diligence includes several primary duties. A few of the basic items include:
- Know the market: Before you purchase a home, get to know the neighborhood and the typical value of the surrounding homes. Talking to residents can help you learn more about the area. It’s best not to rush into a decision.
- Get an inspection and appraisal: An appraisal determines a property’s value, and different types of inspections can help spot problems with plumbing, electrical, the roof, appliances, the foundation, drywall, and many other vital things. Inspectors also look for threats such as wood-destroying organisms, lead-based paint, and radon gas. Knowing a property’s true value – as well as any major repairs it may require (or risks it might create) – can help you make an informed decision about your purchase.
- Find the best deal for financing: Many buyers don’t take the time to get several bids for mortgage financing, but doing so could help you get a better deal and save you thousands of dollars in the long run.
- Find out what kind of insurance you’ll need: Homeowner’s insurance is a must – it will cover losses from natural disasters, theft, fire, and other causes. However, some homes are costly to insure due to their location in an area where flooding, earthquakes, or tornadoes are common – and in some cases, certain properties cannot be insured at all. Before buying a home, find out how much insurance will cost, and shop around to see who can offer you the best price.
It might seem overwhelming to perform due diligence, but a real estate agent or attorney can help answer questions and guide you through each step of the process. Knowing you’ve done your homework before making a major purchase can create peace of mind when it’s finally time to sign on the dotted line and make your ownership official.