What Is Due Diligence in Georgia?

If you are buying a home in Georgia, you will hear the term "due diligence" early and often. It is one of the most important concepts in Georgia's real estate contract, and understanding it can mean the difference between a smooth transaction and a costly mistake.

Due diligence is the period during which you, as the buyer, have the opportunity to thoroughly investigate the property before committing to the purchase. It is your legal window to uncover any issues, verify the property's condition, and make an informed decision about whether to move forward or walk away.

Georgia's Due Diligence Period: The Basics

In Georgia, the due diligence period is a defined number of days written into the purchase agreement. It begins when the contract is signed by both parties and runs for the agreed-upon period, typically 7 to 14 days. During this time, the buyer has the right to conduct inspections, review documents, and evaluate the property.

The key feature of Georgia's due diligence period is that the buyer can terminate the contract for any reason during this period and receive their earnest money back. This is a powerful protection. It means you are not locked into the purchase if you discover something you do not like, whether it is a major structural issue, a neighborhood concern, or simply a change of heart.

In exchange for this right, the buyer typically pays the seller a non-refundable due diligence fee. This fee is negotiated as part of the contract and is separate from the earnest money. The amount varies, but it is typically a few hundred to a few thousand dollars depending on the market and the price of the home. The due diligence fee is the seller's compensation for taking the property off the market while the buyer completes their investigation.

What the Due Diligence Period Covers

During the due diligence period, the buyer typically completes several key activities.

Home Inspection

The home inspection is the cornerstone of the due diligence period. The buyer hires a licensed home inspector to examine the property's structure, systems, and components. The inspection report reveals any issues that need attention, from minor maintenance items to major defects. The buyer uses this information to decide whether to proceed, request repairs, or renegotiate the price.

For a full breakdown of what the inspection covers, see our guide on what happens during a home inspection.

Appraisal

The lender orders an appraisal to verify that the property is worth the contract price. If the appraisal comes in low, the buyer and seller must negotiate how to handle the gap. The appraisal contingency is typically part of the due diligence period, which means the buyer can walk away if the appraisal is unsatisfactory.

Title Review

The buyer's attorney or title company reviews the property's title to ensure there are no liens, encumbrances, easements, or other issues that could affect ownership. A title search reveals whether the seller has clear title to the property and whether any claims exist against the property.

Financing Confirmation

The buyer works with their lender to finalize their loan approval during the due diligence period. This includes providing all required documentation, locking in an interest rate, and confirming that the loan terms are acceptable. If the buyer cannot secure financing, they can terminate the contract during the due diligence period.

Additional Inspections

Depending on the property, the buyer may also order additional inspections during the due diligence period. These can include termite/pest inspection, radon testing, mold inspection, sewer scope, well water testing, and septic system inspection. In Georgia, termite inspections are especially important given the state's climate and termite activity.

How Georgia's Due Diligence Differs from Other States

If you are moving to Georgia from another state, you may notice that the due diligence process works differently here. Here are the key differences.

Option period vs. due diligence period. Some states use an "option period" where the buyer pays a fee for the right to terminate the contract for any reason. Georgia's due diligence period serves a similar function but is more comprehensive. The due diligence period in Georgia includes the inspection, appraisal, and financing contingencies, whereas some states handle these as separate contingencies outside the option period.

Earnest money protection. In Georgia, the buyer can terminate during the due diligence period and receive their earnest money back. The only money the seller keeps is the non-refundable due diligence fee. In some states, the buyer risks losing their earnest money if they terminate without a specific contractual reason.

Attorney-closing state. Georgia is an attorney-closing state, which means a real estate attorney handles the closing. The attorney plays a role in the due diligence process by reviewing the title, coordinating with the lender, and preparing the closing documents. In some states, title companies handle the closing without attorney involvement.

GAR contracts. Most residential transactions in Georgia use the Georgia Association of REALTORS (GAR) purchase agreement. The GAR contract has specific language about the due diligence period that is standard across the state. This consistency makes it easier for agents and attorneys to navigate the process.

Buyer's Right to Terminate During Due Diligence

One of the most important protections for buyers in Georgia is the right to terminate the contract for any reason during the due diligence period. This is not limited to specific issues. You can terminate because the inspection revealed a problem, because the appraisal came in low, because you decided you do not like the neighborhood, or for no stated reason at all.

To terminate, the buyer provides written notice to the seller before the due diligence period expires. The buyer receives their earnest money back, and the seller keeps the due diligence fee. This is a clean, straightforward process that protects buyers from being locked into a purchase they are not comfortable with.

Once the due diligence period expires, the buyer's right to terminate for any reason ends. After that point, the buyer can only terminate if specific contingencies (such as the financing contingency) are still active or if the seller breaches the contract.

What Happens If Issues Are Found During Due Diligence

It is rare for a due diligence period to pass without any issues being identified. Most homes have something that comes up. Here is how the process typically works when issues are found.

Step 1: Review the findings. Your agent helps you review the inspection report, appraisal, and any other findings. We categorize each issue by severity: safety concerns, major defects, and minor maintenance items.

Step 2: Decide what to ask for. Not every issue warrants a repair request. Minor items like a dripping faucet or a loose doorknob are normal for any home and are typically not worth negotiating over. Focus on significant issues that affect safety, value, or your ability to enjoy the home.

Step 3: Submit a request. Your agent prepares a formal request to the seller. This can ask for specific repairs, a credit toward closing costs, or a price reduction. The request is typically submitted as an amendment to the contract.

Step 4: Negotiate or walk away. The seller can agree to the request, make a counteroffer, or refuse. If the parties cannot reach an agreement, the buyer can terminate the contract during the due diligence period and receive their earnest money back.

How Sellers Should Prepare for Due Diligence

If you are selling your home, the due diligence period is not something to fear. Here is how to prepare so the process goes smoothly.

• Be transparent from the start. Complete the Seller's Property Disclosure Statement honestly and thoroughly. Disclosing known issues upfront builds trust and reduces the chance of surprises during due diligence.
• Make the home accessible. Ensure the inspector can access all areas of the home, including the attic, crawlspace, electrical panel, water heater, and HVAC system. Clear away any clutter or stored items that might block access.
• Consider a pre-listing inspection. A pre-listing inspection lets you identify and address issues before the buyer's due diligence period. This gives you control over the timing and quality of repairs and reduces the risk of surprises. Read our full guide on pre-listing inspections.
• Be prepared to negotiate. Most due diligence periods result in some form of negotiation. Know your bottom line going in, and work with your agent to determine which repairs you are willing to make and which you will push back on.

Georgia-Specific Contract Terms to Know

The GAR purchase agreement includes several specific terms related to due diligence. Here are the most important ones to understand.

• Due diligence period. The specific number of days written in the contract, typically 7 to 14 days. The buyer can terminate for any reason during this period and receive their earnest money back.
• Due diligence fee. A non-refundable fee paid by the buyer to the seller in exchange for the right to conduct due diligence. The amount is negotiated and typically ranges from a few hundred to a few thousand dollars.
• Earnest money. A deposit made by the buyer as a show of good faith. Earnest money is held in escrow and returned to the buyer if the buyer terminates during the due diligence period. It is applied to the purchase price at closing if the deal goes through.
• Financing contingency. A contingency that allows the buyer to terminate if they cannot secure financing. This is typically tied to the due diligence period but may extend beyond it in some contracts.

The due diligence period is one of the most important protections a buyer has in Georgia real estate. It gives you the time and the right to investigate the property thoroughly, make informed decisions, and walk away if something is not right. For sellers, it is a period of patience and preparation. For both sides, having an experienced agent who understands the process is the difference between a stressful experience and a smooth one.