Alliance Bay Realty
Buyer Due Diligence Guide
Understanding Your Responsibilities When Purchasing Real Estate
Purchasing real estate is a major financial and legal decision. While your real estate agent can guide you through the process, buyers are ultimately responsible for investigating the property and making informed decisions.
This guide outlines the key due diligence responsibilities of a buyer when purchasing a property.
- Financial Preparation
Before making an offer, buyers should ensure they are financially prepared.
Buyer responsibilities include:
- Obtain a loan pre-approval from a reputable lender
• Maintain stable employment and income during escrow
• Avoid opening new credit accounts or taking on additional debt
• Have funds available for:
- Earnest money deposit
- Down payment
- Closing costs
- Inspection fees
Buyers must also deliver the earnest money deposit within the deadline specified in the purchase agreement, typically within 3 business days under the California Residential Purchase Agreement (RPA).
- Reviewing Seller Disclosures
California law requires sellers to disclose known material facts about the property. Buyers must carefully read and review all disclosures provided.
Common disclosures include:
- Transfer Disclosure Statement
• Seller Property Questionnaire
• Natural Hazard Disclosure Statement
• Lead-Based Paint Disclosure (homes built before 1978)
• Agent Visual Inspection Disclosure
Buyers should:
- Review disclosures carefully
• Ask questions about any concerns
• Seek professional advice when necessary
Failure to review disclosures may expose buyers to unknown risks after closing.
- Property Inspections
Buyers are strongly encouraged to conduct independent inspections to determine the condition of the property.
Common inspections include:
- General home inspection
• Pest / termite inspection
• Roof inspection
• Foundation inspection
• Sewer lateral inspection
• Chimney inspection
• Mold inspection
Additional inspections may include:
- Pool or spa inspection
• Solar system inspection
• Septic system inspection
• Well inspection
Buyers are responsible for:
- Hiring qualified inspectors
• Paying inspection fees
• Reviewing inspection reports
• Determining whether to request repairs or credits
- Neighborhood and Area Investigation
Buyers should independently investigate the surrounding neighborhood and local conditions.
Areas to research include:
- Schools and school districts
• Crime statistics
• Noise levels
• Traffic patterns
• Zoning and land use
• Future developments
• Nearby commercial activity
Buyers should not rely solely on verbal statements regarding neighborhood conditions.
- Title and Ownership Review
Before closing, buyers will receive a preliminary title report from the title company.
The report may disclose:
- Easements
• Property tax obligations
• Liens
• Deed restrictions
• CC&Rs (Covenants, Conditions, and Restrictions)
Buyers should carefully review this report to ensure they are comfortable with any restrictions or encumbrances affecting the property.
- Homeowners Association (HOA) Review
If the property is located in a community with a homeowners association, buyers will receive HOA documents.
These may include:
- HOA rules and regulations
• Monthly dues
• Budget and reserve funds
• Pending litigation
• Special assessments
Buyers should review these documents to ensure they understand the obligations associated with the HOA.
- Appraisal
If the purchase is financed with a mortgage, the lender will require an appraisal.
The appraisal determines whether the property value supports the loan amount.
If the appraisal comes in below the purchase price, buyers may:
- Renegotiate the purchase price
• Increase the down payment
• Cancel the transaction under the appraisal contingency (if applicable)
- Insurance Investigation
Buyers should investigate the availability and cost of insurance.
This may include:
- Homeowners insurance
• Flood insurance (if applicable)
• Earthquake insurance (optional in California)
• Fire insurance in high-risk zones
Proof of insurance is typically required before loan funding.
- Final Walk-Through
Before closing, buyers are entitled to perform a final verification of property condition.
During this walk-through buyers should confirm:
- The property condition has not materially changed
• Agreed repairs have been completed
• Fixtures and appliances remain as agreed
• The property is vacant if required by contract
- Signing Closing Documents
Prior to closing, buyers must review and sign closing documents with escrow.
Documents may include:
- Loan documents
• Closing Disclosure (CD)
• Escrow instructions
• Tax forms
Buyers should review these documents carefully and confirm that the loan terms match their expectations.
- Funding the Purchase
Before closing, buyers must deliver funds to escrow.
These funds may include:
- Down payment
• Closing costs
• Prepaid property taxes
• Insurance premiums
Funds are typically delivered via wire transfer or cashier’s check.
- Buyer Advisory
While your agent provides guidance, buyers are responsible for conducting their own investigations.
Real estate agents:
- Are not contractors
• Are not engineers
• Are not attorneys
• Are not tax professionals
Buyers should seek appropriate professional advice when needed.
Important Reminder
Real estate purchases involve legal, financial, and physical property considerations.
Buyers are strongly encouraged to:
- Read all documents carefully
• Ask questions before removing contingencies
• Conduct thorough inspections
• Consult qualified professionals when necessary
Alliance Bay Realty Commitment
The team at Alliance Bay Realty is committed to helping buyers navigate the real estate process with transparency, professionalism, and guidance.
Our goal is to help you make informed and confident decisions when purchasing your home.