Due diligence is an extremely important part of buying a property or home. Basically, it means that a buyer needs to thoroughly check out a property before purchasing it. In some cases, especially with commercial property, it may be required by the lender before a loan can be completed. The time frame to complete due diligence is very limited depending on the agreement between the seller and the buyer.
Why should due diligence be done?
Buyers need to do as much due diligence as possible. If they don't, then they are responsible for anything that is wrong with the property that they didn't discover before the sale. Because of the potential issues that might arise, it is advisable that you contact a real estate attorney as soon as you decide on which property to purchase and inspect. Your attorney can check over the contract, negotiate time frames, deposits/fees, or any other issues that may arise while you are doing your due diligence.
What should due diligence should check for?
Whether you are buying a commercial property or a residential property, due diligence should be done for specific problems related to how you will use the property. Even if the lender doesn't require due diligence for certain items, it may be in your best interest to check them anyway. Some of the common things to look for when doing due diligence include:
- Environmental issues, including potential flooding, mudslides, and other potential harms to the property
- Schools, crime, and the nature of the neighborhood
- Zoning and land use issues
- Taxes (including special assessments)
- HOA rules (if applicable)
- Problems with the structure
- Land use issues
It is important that all issues be documented.
What if a problem is found?
No property is perfect for everyone and, chances are, there will be problems found during discovery. If you find that a situation is completely unsatisfactory, then it is best to walk away and find another property. Otherwise, an attorney can be extremely helpful with working out a negotiation. It's important that most, if not all, problems are addressed before closing. If not, then you as the buyer are liable for anything that happens to the property afterward.
Due diligence is one of the most important things to do before buying a property. But, it can be confusing and complicated in some cases. While it is possible to do your due diligence without an attorney, it is more to your advantage to hire one. For more information, contact Drennan Law Office or a similar firm.Share