Property Inspection and Due Diligence

Although I used my handyman friend to inspect the first fixer upper house that I bought, in later houses I hired a professional property inspector to go through the house and to provide me with a complete inspection report.

The Value of the Inspector’s Report

The inspector’s report can be used to help you negotiate a lower price on the house if they uncover anything in the house that is in need of repair. Hiring a qualified property inspector is a good way to make sure that you are really getting what you pay for in a house.

Due Diligence Allows You to Correct Deficiencies

Once you have made an offer on a house and it had been accepted by the seller, the “due diligence” period begins and you have until the close of escrow (or completion of the sale) to check out the physical and financial condition of the property. If you discover that the property has problems, but you think the deal is still worth pursuing, the seller may be willing to correct any deficiencies, or give you money to complete the necessary work yourself.

Two Key Components of Due Diligence

There are two key components of due diligence process:

1. Review of books and records
In my case, there are usually no records to review. Most of the houses that I buy have been fixer-uppers repossessed by a bank, the Veterans Administration or HUD, and the owner is long gone.

2. The physical inspection
When there is no owner present this makes the physical inspection all the more important.

The due diligence period is your last opportunity to either:

1.) complete the transaction, or

2.) cancel the escrow, have your money returned, and look for another property.

“Carve Out Your Niche” TV Interview Monday

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6 Responses to “Property Inspection and Due Diligence”

  1. […] course, you must conduct a good inspection of the property either before you make the offer, or during the 7 to 10 day inspection period after your bid is […]

  2. […] lesson did I learn? In the future, I will always walk through the property one last time before signing the closing […]

  3. […] fixer-upper townhouse that I am purchasing. I had the inspection done last Wednesday (naturally, I followed the inspector around so I could see the problems that he saw), the appraisal should have come in today, and we are closing […]

  4. […] I offered $100,000 on the $115,000-listed fixer upper townhouse. The owner came back with $110,00. I came back with $105,000, and the owner accepted my offer. More […]

  5. […] One of my favorite real estate investing authors, and someone who has inspired me in my own  fixer upper house business, is Fixer Jay DeCima. He has a very informative webpage at http://www.fixerjay.com. I regularly check out […]

  6. […] the city to do an inspection, prior to purchasing a new home, it’s critically important to hire your own inspector to make sure that everything is “operational” in the house that you want to […]

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