Explaining Due Diligence in the Homebuying Process

Buying your first home? Or maybe, just trying to freshen up on the process because it’s been a while. That’s a smart thing to do when you’re planning a big purchase. And due diligence is something that, well—you want to do due diligence on. So let’s dig deeper.

What is Due Diligence in the Homebuying Process?

No home is perfect, even a brand new one. That’s why, before you make a big investment into one, you want to complete a home inspection. In terms of the buying process, a home inspection occurs after you’ve found your dream home and made an offer that’s been accepted.


Although an accepted offer means that you’ve already settled on a base number, it doesn’t mean that number is set in stone. One of the things that might affect your offer is a home inspection. Due diligence includes more than the home inspection, though. There are things that you, your real estate agent, and maybe even your attorney might also do during a due diligence period to make sure that you’re satisfied with the offer you’ve made, the terms of your contract with the buyer, and the property you’ll be purchasing.     

How Long Does Due Diligence Typically Last?

Different states might refer to the due diligence period in different ways, but it typically includes the same steps and can last anywhere from 7-30 days, depending on the complexity of the purchase. The due diligence period also gives you time to get your finances in order so you’re prepared to move forward with the purchase. This is important because once you complete the due diligence period, you typically can’t walk away from your contract without losing any earnest money that you may have put down—earnest money being cash that you’ve put down to prove that you’re a serious buyer with plans to follow through on your end of the contract.


What Steps Should be Taken During Due Diligence?

There could be a series of inspections that take place during your due diligence period. This could include a general home inspection, where a home inspector tests things like outlets, plumbing, and appliances to make sure that everything is in working order. They also check for any safety concerns and obvious foundational or structural issues.


From this initial inspection, you might be advised to complete other tests or inspections, such as an asbestos test for suspect material or lead-based paint inspection. Other tests include a wood-destroying organisms (WDO) inspection, which many lenders may require to check for issues like wood rot and termites, a radon gas inspection, or even a defective drywall inspection if your home was built between 2001 and 2009.


During your inspection period, you can also collect estimates and quotes for work that you know will have to get done as a result of the inspection. Or quotes for work that you expect will have to be taken care of. This information could create new requests or negotiations on part of the buyer or seller. For example, say you made an offer on a home but the home inspection came back and said the cooling system wasn’t in working order. If cooling was included as a feature of the home, a seller might push back on a buyer and ask that they either repair the cooling system or offer credit so that the buyer can take care of it.


What Steps Should a Buyer Take During Due Diligence?

While inspectors are busy determining what issues there might be in your home, there are steps that you can be taking too, to make sure you’re doing your own due diligence. Look further into the neighborhood your home is located in. Is it safe? Will you have access to good schools if you need them? Have homes in the area appreciated over the past few years?


You can ask your real estate agent to help you do some of this research. They should already have researched the prices of homes in the area though, before you made an offer, to determine what a fair offer would be. If you no longer feel comfortable with the offer you’ve made, now is the time to have second thoughts, because you won’t be able to walk away after due diligence without losing money.


As we mentioned above, you also want to take your due diligence time to start researching mortgage companies if you plan on financing your home. You will also probably have to schedule an appraisal to complete that process and an appraisal might impact the sale price of the home.



Completing due diligence during the home buying process might seem intimidating, but it’s an opportunity for homebuyers to protect themselves and research the investment they’re making before they fully commit. Use the time to your advantage and don’t commit to anything you feel uncomfortable with. Also, don’t be afraid to go back to the negotiating table if your due diligence turns up something that you’re uncomfortable with. Buying a home is a long-term commitment, so make sure you’re going to be satisfied with your investment for the next few months, but also the next few years.



Contributed to Your Home blog

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Published 08.27.2021

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