Due Diligence is defined as: the care that a prudent person might be expected to exercise in the examination and evaluation of risks affecting a business transaction.
Before you purchase a pre-foreclosure property, you should conduct a thorough property inspection. If you do not have or know someone that has a construction background, then you should hire a property inspector. In order to find a certified inspector, you can visit the American Society of Home Inspectors at www.ashi.org/find to find members located in your area. An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs that are needed.
The website http://www.dspinspections.com/home.htm provides a pretty good checklist that you can utilize for this type of inspection. You should always focus on potential major defects, to include:
- Roof Damage
- Structural Damage
- Signs of Mold
- Dry Rot
- Water Damage
- Electrical Problems
- HVAC Problems
- Signs of Termites
- Environmental Contamination
- Lead-Based Paint Hazard (if house was built before 1978)
It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house "as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an out on buying the house if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problems before you purchase the house. |
The importance of a home inspection extends beyond just pre-foreclosures. Even a house where the owner is in good standing can possess a number of minor and/or major problems that no buyer wants to be saddled with.