Once the contract has been signed, the buyer's "due diligence" period begins. Due diligence is just a fancy term for the various inspections and inquiries the buyer, their agent and lawyer will be making regarding the property.
• The first due diligence item is typically the property inspection. The buyer should hire a certified home inspector. The State of Vermont does not have a program for licensing home inspectors so the best you can do is to find an inspector that has been certified by the National Association of Home Inspectors – NAHI.
• The inspector will likely recommend testing for radon gas. The EPA has set guidelines for radon gas and has information on its website regarding the health risks associated with radon gas. While most agents will tell you that the "legal level" for radon gas is 4.0 pCi/L, that is not an accurate statement. There is no law or Federal regulation for radon at the moment. Instead the EPA has set recommended guidelines for taking action to mitigate the levels of radon in a home. The EPA's guidelines say that a mitigation should be installed when the level is 4.0 pCi/L or higher but they also recommend mitigating when the level is between 2.0 pCi/L and 4.0 pCi/L.
• The inspector will also be able to advise as to the general condition of the property and whether there are safety concerns or possible code violations. The inspector however will not opine as to specific codes requiring a licensed professional in Vermont. For instance, the inspector will refer plumbing issues to a licensed plumber and electrical issues to a licensed electrician.
• Once you receive the inspector's report, you will have to notify the seller of whether you wish to continue with the contract or terminate the contract. The contract does not require the seller to repair items. However, you can usually threaten to terminate the contract unless the seller makes the repairs. So long as the items are reasonable and cost effective, the seller will typically agree to the repairs. If the seller does not agree, you can proceed with the closing but you will be responsible for those items rather than the seller.
• Assuming you are satisfied with the results of the home inspector's report (or any other reports - radon, well water, septic), then the due diligence phase turns to the seller's title to the property. Like an automobile, the seller's title is the evidence of the seller's ownership of the property. The seller's evidence of title is usually in the form a deed. The deed will be found in the town's land records. Your attorney and/or the bank's attorney will be the one conducting this aspect of your due diligence.
• In addition to the seller's deed, the attorney will be looking into the "chain of title". The chain of title is the history of the property found in the town's land records. The attorney will be able to track the ownership back to see if the seller has any "liens" on the property. Most sellers will have at least one lien on the property. The seller's current mortgage is considered a lien. This lien will be discharged at closing.
• Not only will the attorney look for the seller's current mortgage but also any other liens or problems that may affect your ability to purchase the property. If there are other problems in the chain of title, the attorney will notify you as well as the seller's attorney of the problems. Under the standard contract in Vermont, the seller must use reasonable efforts to rectify the problems.
• Unlike most states, where the buyer's attorney just checks the land records, in Vermont the buyer's attorney must also investigate the records in other municipal offices. The buyer's attorney must check the zoning office, building office and any other office that might issue permits or inspect property. The buyer's attorney must confirm that there are no violations or open permits in the town's offices.
• If the property is a condominium unit, in addition to searching the local records, buyer attorneys require the seller to provide a current Public Building Certificate of Occupancy. In most cases the condo owner will not be able to provide a current Certificate of Occupancy because most condo buildings do not have them. Instead, the seller must have the Fire Marshall inspect the condo to make sure there are no violations. The buyer's attorney will accept this report in lieu of a current Public Building Certificate of Occupancy.
• If the seller's title to the property is free and clear then in legal terms they have a "marketable title" that they can sell to you. The seller's attorney will prepare a deed for your attorney to review. Your attorney will review the seller's deed prior to the closing to make sure it accurately represents the conveyance of the property to you.
• When the seller's attorney sends the deed to your attorney, your attorney will likely ask you how you would like to "hold title." There are few options in Vermont for holding title. You can take title in your own name individually. This means you will be the sole owner of the property. You can take the property as a "tenant in common," which means you own the property with someone else and you are each entitled to your interest in the property separate from the other. You can hold title as joint tenants which means that you own the property with someone else but you own it jointly and if one of you dies, the other automatically gets the entire property. You can hold title as tenants by the entirety which is essentially holding title as joint tenants but the two parties are married. Finally, you can take title to a property in the name of a trust, corporation, partnership, llc or other entity. The entity is then the owner of the property.
• Once you decide how you'd like to take title to the property and the closing has been scheduled, it is time to prepare for the closing. Prior to the closing you will need to find out how much money you need to bring to the closing. In Vermont, closing attorneys are limited on taking personal checks at closing so you will likely need to arrange to get a bank check or certified check for the closing. We recommend checking with the closing attorney a day or two before the closing so you have enough time to get a bank or certified check.
• A day or two before the closing, you will also want to make sure that all of the utility providers have been notified that you are purchasing the property. You want to make sure there is not a disruption in service. Providers you may want to notify include water, electric, gas, propane, oil, garbage, cable/internet and phone.
• Prior to the closing, you (and your agent) will walkthrough the property to confirm that the condition of the property has not changed. Normal wear and tear is acceptable but damage is not. If there is damage, you need to tell the closing attorney as quickly as possible to determine how to deal with the change in condition. If the seller agreed to perform repairs prior to closing based upon the home inspector's report then the walkthrough is the time you normally check to make sure that the work was completed.
Every transaction is unique and issues will arise here and there that you did not anticipate or foresee. The most important thing is to maintain good lines of communication with all parties involved to make sure issues can be dealt with quickly. Real estate agents, lawyers and lenders have seen almost everything so seek their advice when issues arise.