I created another blog site about Iowa’s real estate disclosure law and how the disclosure statement should be handled. Iowa Real Estate Lawyer is the masthead title. If you are selling your home you may find the blogs worth reading. I don’t post often, but the content is extremely focused on the duty of the sellers to disclose defects. Let’s talk today about the sellers’ due diligence.
I have spoken from time to time about the buyers' due diligence, but did you know the sellers should also engage in due diligence? Due diligence is a period of time where you have an obligation to act in some way. When due diligence is applied to residential real estate (a home) it means a period of time where either the buyers or the sellers should be doing something to making decisions about the property that will be for sale.
According to Investopedia "due diligence” is defined as follows:
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale. 2. Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.
What should you, the sellers be doing during your due diligence time period? The good news for sellers is they control the time frame surrounding the sellers’ due diligence time period. Theoretically you can set the period whenever you wish, but from a practical standpoint the seasons set the parameters along with your level of desire to sell. As an example more listings take place in the spring than in the winter, but more contractors are probably looking for work in late fall to early winter than will be available in the spring. Of course replacing the front door in winter has its own hidden cost, a higher energy bill for one.
Think about the due diligence period as the time for you to act proactively in getting your home ready for staging and then for-sale.
How should you prepare for the sellers' due diligence? Well, for starters you need to decide when you would like to sell your home. Depending on how much work will be involved in getting the home ready to list you may need a month or as many as twelve months. It all depends on the extent of work you believe needs to be performed to get the house ship-shape.
- Decide on the listing date.
- Sit down and divide the house into sections. (Main area, upper level, lower level, exterior, garage, landscaping, swimming pool area, patios, decks, driveways, etc.)
- Have each section of the home evaluated for major renovations. (Discuss what you can afford to do and what you can't afford to do. Discuss with a real estate agent those renovations that will add the most bang for the buck.)
- Have each section of the home evaluated for minor renovations. (These are probably things you can do like painting, wiping down, staining, replacing electrical plates, etc.)
- Have the home evaluated for staging. (Keep in mind just because you like it doesn't mean buyers will find it appealing.)
- Create a list of all things in the home that you will not want to move to a new home, because you are going to sell these items.
- Take photographs of the household possessions you will sell and locate user manuals and purchase receipts. (Place all paperwork inside a clear expandable or large Tupperware container. This way everyone knows where to find the right documents when a buyer shows up for a look-see.)
- List these items on CraigsList and/or get ready for a weekend garage sale.
- Whatever you don’t sell then either donate it or toss it out.
- I have heard it said everyone has at least $2,000 of things they don't use stored in their garages, basements and attics.
The last thing you should do is ask your real estate agent for a copy of the sellers’ real estate disclosure statement. Read it and make sure your appliances and home systems work properly. If they don't then either repair them or get rid of them. Why get rid of them? Because it is better to say the home is wired for a washer and dryer than to state, "Nice home with broken washer and dryer!" Even agents will have a hard time spinning that one.
If done right selling a home takes work and some money. If sellers do not do their due diligence then buyers expect to pay less than top dollar. And so do your due diligence, ignoring it will not make it go away.