Last week I wrote about appraisals and financing contingencies that are part of a Georgia real estate contract. Also in a Georgia purchase and sales agreement, the contract will contain a specific section, which can state the property is being sold subject to due diligence or “AS IS”.
The definition of due diligence is as follows: “Due diligence” is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations.
The due diligence period goes into effect for a specific number of days stipulated within the contract. The clock starts to tick once the agreement is binding and is based on that binding agreement date and time. A common example of due diligence in a home purchase is a specified period of time for the potential buyer to perform home inspections, surveys, appraisals, and testing. Based on the findings of the potential buyer during the due diligence, period the buyer has the right to terminate the contact.
The right to terminate the contract by the buyer must be done by giving notice in writing to the seller before the due diligence period expires. If the buyer does not provide the notice in a timely manner, the due diligence period is expired and terminates. Once this takes place the buyer shall be deemed to have accepted the property “AS IS”. With the expiration of the due diligence period it does not terminate any other contingencies, which are subject to the agreement.
The buyer has the right during the due diligence period to provide to the seller an amendment to address concerns. These concerns come forward based on the home inspection, testing, surveys and appraisals, all of which are at the expense of the buyer. These concerns then are presented to the seller and he/she has the right to address and repair any or all of the items specified in the amendment, or not to agree to the repairs. If an agreement cannot be reached, then the contract will be voided.
When a home is either sold or bought “AS IS” both parties to the transaction agree that any repairs or issues related to the home will be the responsibility of the buyer. In this case the seller has no obligation to perform repairs or updates to the home. Even though a home is being sold “AS IS” the buyer can still request a due diligence period which enables the buyer to perform various inspections and obtain repair quotes and pricing. During this period the buyer still can void and dissolve the contract based on any discoveries. This also enables the buyer to request their earnest money to be returned.
The successful execution of a real estate contract can be both complicated and detailed. REALTORS are continuously trained to work and deal with these contracts. This reinforces why I always advocate using a licensed and experienced REALTOR, as their knowledge can be invaluable. Next week I will be discussing earnest money and escrow accounts and how they protect both parties of a transaction.