Commercial Real Estate Due Dilligence
Making a major purchase, such as real estate, means making certain you leave no stone unturned. That is the reason why due diligence is an essential part of buying real estate. Know what you are buying to prevent misunderstandings and mistakes.
In fact, here at Equity Legal LLP, not only are we San Diego real estate attorneys, we are also licensed commercial real estate brokers. Having the combined the power of both licenses allows our firm to offer the best real estate law advice while handling commercial real estate due diligence and investment transactions.
We will attempt to outline some of the steps you need to take in performing proper due diligence, but by no means is this complete. Every real estate transaction is unique, and therefore takes care and wisdom when deciding to purchase a property investment. For your convenience we have compiled a due diligence check list to use as a reference – (Click Here)
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What Is real Estate Due Dilligence?
In basic terms, real estate due diligence defines a process where you are performing “homework.” That means calculating costs, reviewing paperwork, obtaining insurance, and arranging for inspections. In essence, you are doing homework for a property before actually buying it. If too many issues exist, you can eliminate these potential risks by canceling the purchase agreement and seeking another property.
Therefore, a real estate due diligence checklist can be extensive. However, it never hurts to have a general understanding of what is involved. If you are a real estate investor, real estate due diligence companies offer services that simplify real estate transactions. For example, if you are buying a property that is an apartment complex or a large commercial retail space, due diligence may include the following areas:
- Acquisitions and dispositions
- Commercial loan underwriting
- Lease abstraction and analysis
- Tenant recovery calculations
- Confirmation of property financial information
- Confirmation of billings for tenants
- Help with budget preparation
- Assistance with estoppel certificate preparation
Performing Due Dilligence For Real estate
When you are contemplating buying a residential property, basically, due diligence includes the following:
Shopping the Real Estate Market
Make sure you are fully aware of what the market features. Do not review a few properties. Instead, you should spend a few months looking at real estate. Get yourself well acquainted with the marketplace.
Financing a Mortgage
Make sure that the deal you receive on a mortgage is competitively fair.
Performing a Property Inspection
Have an inspection performed and seriously consider the inspector’s comments. Next, contact a contractor or visit the hardware store to see how much any required work will cost. Renovating a property can be a major expense. Therefore, it is important to obtain estimates for the work.
Obtaining Homeowner’s Insurance
Can a homeowner’s policy be issued for the real estate? If so, how much will it cost you? If the real estate is in a hurricane zone, you may not be able to buy insurance. If you can obtain a policy, it may be cost-prohibitive.Obtaining Title Insurance
Obtaining Title Insurance
Have you reviewed the property’s abstract and title insurance? Schedule an appointment with a lawyer to assist you in reviewing the documents. Review the property’s plat as well. Check the easements and walk the property, checking for encumbrances.
The above listing are just some basic tasks you need to do when doing due diligence on real estate. Tasks can become rather comprehensive. Therefore, it often helps to rely on real estate due diligence services, especially when buying commercial real estate.
Real Estate Investment Due Dilligence
Equity Legal LLP is a licensed real estate law firm in San Diego, as well as, licensed real estate brokers. We can assist you on your next commercial real estate transaction with buying or selling a property, or if you have a legal question with regards to your investment. We have included a due dilligence checklist for you to follow as a guide –
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When Buying A Property It's Important To Get Organized
Now that you have been given a basic introduction, you can review what is involved when using a checklist. Whether or not you rely on due diligence services, a checklist can assist you in making any pre-closing activities more organized.
Due Diligence Checklist
- Acquisition Actions and Documents
- Title, Surveys, and Zoning
- Tenant and Lease Matters
- Financial Matters
- Service Contracts
- Property Inspection
- Inventory of Personal Property
- Governmental Review
- Closing and Miscellaneous Actions
- Property Management and Operations
- Internal Reporting
Under the classification of “Acquisition Actions and Documents,” there typically are as many approximately 20 tasks. About 35 tasks need to be performed, for example, under “Closing and Miscellaneous Activities.”
Therefore, performing real estate due diligence can become laborious. However, it still needs to be done in order to purchase an investment property or a home. That is why you need to count on the expertise of real estate due diligence attorneys in San Diego. Whatever your reason for performing the due diligence, it enables you to make a more sound investment or real estate buying decision.