What is due diligence?
Buyer’s opportunity during the Due Diligence Period to investigate the Property to decide whether Buyer, in Buyer’s sole discretion, will proceed with or terminate the transaction.
How long is due diligence period?
This is negotiated by buyer and seller. It should be long enough for the buyer to research all items they want to investigate including final loan approval.
How much is the due diligence fee?
This is negotiated between buyer and seller.
“Due Diligence”: Buyer’s opportunity during the Due Diligence Period to investigate the Property and the transaction contemplated by this Contract, including but not necessarily limited to the matters described in Paragraph 4 below, to decide whether Buyer, in Buyer’s sole discretion, will proceed with or terminate the transaction.
BUYER’S DUE DILIGENCE PROCESS:
(a) Loan: During the Due Diligence Period, Buyer, at Buyer’s expense, shall be entitled to pursue qualification for and approval of the Loan if any.
(NOTE: Buyer is advised to consult with Buyer’s lender prior to signing this offer to assure that the Due Diligence Period allows sufficient time for the appraisal to be completed and for Buyer’s lender to provide Buyer sufficient information to decide whether to proceed with or terminate the transaction.)
(b) Property Investigation: During the Due Diligence Period, Buyer or Buyer’s agents or representatives, at Buyer’s expense, shall be entitled to conduct all desired tests, surveys, appraisals, investigations, examinations and inspections of the Property as Buyer deems appropriate, including but NOT limited to the following:
(i) Inspections: Inspections to determine the condition of any improvements on the Property, the presence of unusual drainage conditions or evidence of excessive moisture adversely affecting any improvements on the Property, the presence of asbestos or existing environmental contamination, evidence of wood-destroying insects or damage therefrom, and the presence and level of radon gas on the Property.
(ii) Review of Documents: Review of the Declaration of Restrictive Covenants, Bylaws, Articles of Incorporation, Rules and Regulations, and other governing documents of any applicable owners’ association and/or subdivision. If the Property is subject to regulation by an owners’ association, it is recommended that Buyer review the completed Owners' Association Disclosure And Addendum (Standard Form 2A12-T) provided by Seller prior to signing this offer.
(iii) Insurance: Investigation of the availability and cost of insurance for the Property.
(iv) Appraisals: An appraisal of the Property.
(v) Survey: A survey to determine whether there are any encroachments on the Property from adjacent properties (fences, driveways, etc.), encroachments from the Property onto adjacent properties, road or utility easements crossing the Property, violations of set-back lines, lack of legal access to a public right-of-way, or indefinite or erroneous legal descriptions in previous deeds to the Property.
(vi) Zoning and Governmental Regulation: Investigation of current or proposed zoning or other governmental regulation that may affect Buyer’s intended use of the Property, adjacent land uses, planned or proposed road construction, and school attendance zones.
(vii) Flood Hazard: Investigation of potential flood hazards on the Property, and/or any requirement to purchase flood insurance in order to obtain the Loan.
(c) Repair Negotiations/Agreement: The parties acknowledge and understand that they may, but are not required to, engage in negotiations for repairs to the Property. Buyer is advised to make any repair requests in sufficient time to allow repair negotiations to be concluded prior to the expiration of the Due Diligence Period. Any agreement that the parties may reach with respect to repairs shall be considered an addition to this Contract and as such, must be in writing and signed by the parties in accordance with Paragraph 20. Unless otherwise agreed, negotiated repairs shall be made in a good and workmanlike manner and Buyer shall have the right to verify same prior to Settlement.
(d) Walk-through Inspection: Buyer may conduct a walk-through inspection of the Property prior to Closing.
(e) Buyer’s Obligation to Repair Damage: Buyer shall, at Buyer’s expense, promptly repair any damage to the Property resulting from any activities of Buyer and Buyer’s agents and contractors, but Buyer shall not be responsible for any damage caused by accepted practices either approved by the N.C. Home Inspector Licensure Board or applicable to any other N.C. licensed professional performing reasonable appraisals, tests, surveys, examinations and inspections of the Property. This repair obligation shall survive any termination of this Contract.
(f) Indemnity: Buyer will indemnify and hold Seller harmless from all loss, damage, claims, suits or costs, which shall arise out of any contract, agreement, or injury to any person or property as a result of any activities of Buyer and Buyer’s agents and contractors relating to the Property except for any loss, damage, claim, suit or cost arising out of pre-existing conditions of the Property and/or out of Seller’s negligence or willful acts or omissions. This indemnity shall survive this Contract and any termination hereof.
(g) Buyer’s Right to Terminate Buyer shall have the right to terminate this Contract for any reason or no reason, by delivering to Seller written notice of termination (the “Termination Notice”) during the Due Diligence Period (or any agreed-upon written extension of the Due Diligence Period), TIME BEING OF THE ESSENCE. If Buyer timely delivers the Termination Notice, this Contract shall be terminated and the Earnest Money Deposit shall be refunded to Buyer.
(WARNING: If Buyer is not satisfied with the results or progress of Buyer’s Due Diligence, Buyer should terminate this Contract, prior to the expiration of the Due Diligence Period, unless Buyer can obtain a written extension from Seller.
SELLER IS NOT OBLIGATED TO GRANT AN EXTENSION. Buyer’s failure to deliver a Termination Notice to Seller prior to the expiration of the Due Diligence Period shall constitute a waiver by Buyer of any right to terminate this Contract based on any matter relating to Buyer’s Due Diligence.)
Should Buyer fail to deliver either the Due Diligence Fee or any Initial Earnest Money Deposit by the Effective Date, or should any check or other funds paid by Buyer be dishonored, for any reason, by the institution upon which the payment is drawn, Buyer shall have one (1) banking day after written notice to deliver good funds to the payee. In the event Buyer does not timely deliver good funds, Seller shall have the right to terminate this Contract upon written notice to Buyer.