Over the last five years or so, the majority of real estate contracts written in Georgia have a “Due Diligence” provision rather than an inspection contingency.
Due diligence essentially creates an option period for a buyer. For the mutually agreed upon time frame the buyer may employ ANY criteria for determining the suitability of the sale.
Since a buyer can unilaterally terminate for ANY reason, often it’s a bout of buyer’s remorse that ends the deal and not anything specific about the property.
Sellers usually want to know the reason for the termination, but the buyer is under no obligation to provide one. They may simply change their mind.
Some may feel that it is too easy to walk away from a binding agreement. But the argument could be made that one cannot make such an important decision before taking enough time to thoroughly investigate ALL of the factors of the sale.
Do we lose a significant amount of contracts due to buyer’s remorse? Of course we do. But once a buyer gets past the option period you can feel a lot more confident that the transaction will close.
And that everyone is proceeding with eyes wide open!
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I think we will always have buyer's remorse in real estate and a lot of times our job requires us to help people overcome that. But, I do think you are right, once they get past that time when they can't backout without penalty, they are certainly a lot less sale fails. (I know a lot of agents have asked that a property not have to be put in as sale pending until after the inspection period, but I don't see that happening)
Interesting. I have not seen this clause in any contracts I have worked on.
Hi, Richard -- what an interesting topic. I've never heard of this before but am wondering how long that time frame typically is. The first thought that popped in my head when I read this was has there been a noticeable increase in the number of buyers that walk "just because" since this was implemented. Will be interesting to read other comments.
Better they walk early then create havoc later.
Counseling and supporting our clients through the period of anxiety known as 'buyer's remorse' is a taxing part of the job.
Richard - We have several contingencies that are a free walk, such as the home inspection or review of the HOA/Condo documents, but these tend to be taken care of fairly early in the transaction time line. Lately we have been seeing more low appraisals muck the works than buyers remorse, as I see it. Most of the close-in areas that I cover are squarely in a sellers market, so if a buyer walks there is a good probability that another one will write an offer.
We work both seller side and buyer side. Personally, I hate the due diligence addition to our offer to purchase. I think the minute people hear they can walk for any or no reason, they write offers to purchase they would not otherwise have written. They are more apt to play games, and the seller is truly harmed. We have to place their home in pending, which means no one else wants to show it. They get busy getting ready to move and their hopes are dashed by people just playing games. Sure there have always been outs for people, but none this simple and all encompasing.