Due Diligence in our sales contract. What is it?

On Sunday  I discussed an offer with a client and was explaining the due diligence clause in our Georgia sales contract.  Simply put, the due diligence clause is a "no questions asked  I want out clause", or some peole say a "14 day test drive".  Yep, thats right.  Anytime during this period a buyer can simply say "I don't want it" and walk away.  The seller has no recourse.  Of course the seller can take back up contracts on the property in case the buyer decides to opt out of purchasing.

An example would be.  Mr Jones makes an offer on 123  Anywhere street.  In the offer he has a 14 days for his due diligence.  So, Mr. Jones has 14 days to do all his inspections, check for termites, get his financing, and basically decide if he wants to buy the home or not.  During this "due diligence" he can request repairs if he finds anything that he feels needs correcting.  Or if he is not happy with the home, he can just walk away.  But come the 15th day,  all his rights under the due diligence go away and unless there are other terms in the contract, he has to proceed to closing on the date in the contract. He can't go back and ask for repairs, seller concessions, or for that matter, anything. 

So that is the cliff note version of the due diligence clause in our contract!

Today some of us in the office were talking about foreclosures.

Today in the office some of us were talking about all the calls that agents are getting from buyers wanting to buy a forclosued home.  So I'm not going to discuss all the subject here today, but I will hit the high points.  First, there are a number of way to purchase a foreclosure. 

The first way is to buy a home off of the courthouse steps.  In Georgia, a home has to be advertised in the paper for 30 days and then is sold on the courthouse steps the first Tuesday of the month to the highest bidder.  Its an interesting process and well worth your time to see how it works.  This way of purchasing a foreclosure is not for the faint at heart.  The bank that holds the mortgage  on the property will most likely be there and start the bid at what is owed on the home.  In order to bid, you have to have the CASH to close and close within so many days.  Also, you are purchasing the home without seeing the inside. 

The second way is to buy a foreclosure when it goes on the market with the bank or a real estate agent.  Buy purchasing this way, you can inspect the home and see what needs to be repaired.  Most REO properties need some sort of work.  From minor cosmetic to a complete rehab.  So that home that is priced at $80,000.00 and looks good on the outside, might need $30,000.00 of work on the inside.  Some homes are liveable and some are not.  With a REO purchase you most likely will need a pre-approval letter from a lender a minimum of $500.00 earnest money to even have your offer considered.  The REO company will usually not do any repairs on a property or give any sort of allowance, nor will they do any financing.  What you see is what you buy. 

So if your interested in a foreclosure, my suggestion is to get with your lender and get a pre-approval letter, not a pre-qualifying letter.  Start talking to inspectors, so you find one you feel confident with, and start looking around at some foreclosures so your familiar with the condition of the homes.  Also, ask an agent to give you copies of the contracts that some REO companies use.  The paperwork is very pro owner and a buyer not only can lose their earnest money, they also give up a number of rights.  On that note, don't expect to change the paperwork, the REO company won't budge on this.  They simply will move on to another buyer. 

So yes, you can get a good buy on a foreclosure.  You can save anywhere from 10% to 50% on a home.  But you have to be in a position to put a lot of sweat equity or have some cash available to redo the home.  But remember, sometimes you can get caught up in buying a foreclosure.  I see a buyer purchase a foreclosure and say they got a fantastic deal.  When right down the street is a home the same floor plan, completely renovated and when all said and done, a better buy! 

I was asked: "Should I wait till spring to put my home on the market?"

I get this question all the time from sellers.  "Should I put my home on the market now or wait for spring?" My answer over the years is to don't wait on Spring.  My reasoning is that in spring everyone else is putting their home on the market.  The competition is gearing up. Everyone is sprucing up their yards.  doing spring cleaning.  All of a sudden you put up a for sale sign and what happens?  Five other homes go for sale! 

I see it happen all the time.   I get a customer in the winter looking for a home  in a certain subdvision.  There are none available.  Or maybe just one home for sale and its a two story and my clients need a one story.  So what happens?  They buy in another subdvison.

Then comes spring....houses go on the market.  Where there was one on the market, there now is five.  Yes, activity can bring more buyers to a area, but you also have more competition.  So to keep up, you have to make sure your house is better than the competition.  More landscaping, maybe even dropping the price.   I'm not saying that spring is a bad time.  But if you can,  I alway suggest putting your home on the market early and beat the rush. 

An interesting article

This article appeared in our Athens Banner Hearld last week.  I thought it would be of interest to evryone.

Athens to beat state in economic growth rate

ATLANTA - The Athens area will avoid a recession this year and grow at twice the rate of the rest of the state, according to Georgia State University's Economic Forecasting Center.

In a quarterly outlook released Wednesday, Georgia State economists predict metro Athens will add 1.6 percent more jobs - compared to the anemic 0.8 percent growth forecast for the rest of Georgia.

While Athens should dodge a recession, the local economy will see fewer new jobs in 2008 than in the last quarter of 2007, when the city added 2 percent more jobs.

The authors of the forecast note the recession-proof nature of the taxpayer-funded University of Georgia as the area's largest economic engine.

"For this reason, we expect the employment growth in Athens to remain stable and increase by 1.6 percent and 1.7 percent in 2008 and 2009, respectively," they wrote.

The local unemployment rate rose slightly from 3.6 percent in December of last year to 3.7 percent in the same month this year.

Published in the Athens Banner-Herald on 022808