If you are in the process of buying a house and are under contract, you will have what is called your due diligence period. This is a period in which it is your obligation to investigate a number of things regarding the house and then decide if you want to back out of the real estate deal. If you fail to do any of your due diligence during the allotted time but you want to back out, then you will have to give up your earnest money which could be tens of thousands of dollars. So, what should you be doing during your due diligence?
Get a Home Appraisal
If you are getting a home loan, they will always order a home appraisal during your due diligence period to make sure that the value of your house isn't less than the loan amount that you are requesting. Why? Because if you are taking out more than the home is worth, then it is a liability for the lender. For instance, if you take out 350k on a home that's only worth 300k and you default on the loan, then the bank will only be able to sell your house for 300k and will be out 50k. If the appraisal for the home that you want comes in lower than the purchase price, then you can go back to the seller to try to negotiate for less since you won't be able to qualify.
Get a Home Inspection
A home inspection is almost always optional for the buyer to do but it's well worth the cost. By paying a couple of hundred dollars, you can know exactly what it is you are getting into when you're buying your home. For instance, if you are buying a really old home, you will want to know if there are problems with things like mold, the electrical work, the plumbing, the roof, the foundation, and anything else. If there is something wrong then you can go back to the seller and either request that they fix the issue or that they reduce the price so that you can fix it when you move out.
One thing to know about your due diligence is that once the buyer knows that something is wrong with the price of their home or the sale of their home, they are legally obligated to disclose that information to their buyers. So, it's in their best interest to negotiate with you, because either way they are going to have to end up negotiating with someone else regarding the same issues.
To learn more about your home appraisal or inspection, reach out to your realtor for some referrals.