Do ‘da Due Diligence
Dance
“Due
Diligence”, saying it just makes you feel smarter, doesn’t it? Due Diligence is “the act of
investigation prior to signing a contract”; now doesn’t that sound
prudent? Ignoring your due
diligence can and probably will place you in a pile of Due Due, and while pigs
may be happy in it – people generally are not. So let’s look at the three most important factors to conduct
your due diligence on prior to placing an offer.
Nothing is certain
but HOA fees and Taxes
When
I moved to Florida decades ago, I had no idea what a Home Owners Association
was. Gated communities in my neck
of the woods were mainly prisons and mental disability wards, and “associations”
in Rhode Island are generally comprised of stocky Italians in silk ties. The importance of taxes and HOA fees can
and will likely be an imperative part of the equation when purchasing a home,
especially if going with FHA financing. High monthly fees and a large tax rate can potentially kill
your deal if the numbers put you over your approved monthly ratios. If you happen to fall in love with a
house with high fees and taxes, be sure to run the numbers with your loan
officer prior to placing an
offer. Find out what your maximum
purchase price can be with these fees involved, and then start the negotiation process with seller. Doing this can and will protect you in
the long run, no one wants to be embarrassed by a loan denial based primarily
on high HOA fees.
History repeats – so don’t
be a part of it!!
If
a deal seems to good to be true… it probably is. No surprise here, we’ve heard it, read it and said it
before, but we all seem to still be surprised when we end up with a lemon. What can prevent you from trying to
make lemonade? DUE
DILLIGENCE! If a home has the eerie
feel of a lemon in the making, get out your Sherlock Holmes gear and get to
work! Your Realtor® can and should
be able to help you with this.
What to look for? A string of dead deals; if a home has been on the
market for some time and the deal looks too good to be true, have your agent
look into the homes history. You’ll
want to look at pending sales that fell apart and try to find out why. Also research liens and tax records on
the home. An agent worth their
salt will know the triggers to look for, and can keep you out of a sticky
situation. While these are factors
that you will probably learn about in the near future, wouldn’t you rather know
before you write an offer, place
funds in escrow, and hire an inspector?
Dare to Compare
Just
because a home is listed at a certain price does not indicate it’s true
value. The thought isn’t
brilliant, nor is it unknown, but it is often
forgotten once a buyer falls in love with a particular property. When you do find that perfect dream
home, the one you’ve been searching high and low for; be sure not to jump
without preparation. And how do we
prepare? DUE DILIGENCE!! We all get blinded when we see
something we desire, and often throw caution into the wind. It is crucial that you maintain a level
head when and if this happens. Don’t
get caught up in the beauty, focus on the deal. If working with a buyer’s agent, please be sure that they “comp
out” (use comparable sales to predict worth) other sales in the community
and/or immediate area. Be sure
that your offer reflects true fair market value, and doesn’t exceed 10% over that
value. The home may be just right,
but if you offer then it’s worth, your budget will be tight.
These
three Due Diligence tasks will help keep you protected in your future Real Estate
transaction. We all get excited when we finally find
what we’ve been looking for (I hope some day Bono get’s there), but without
proper preparation and DUE DILIGENCE your dream home may turn into a
nightmare. Keep the sleep, do your research and
prosper, prosper, prosper.
