Today we are covering the purpose of a due diligence period in commercial real estate. Due diligence is a commonly accepted business practice that verifies key facts concerning a real estate transaction.
A simple example of due diligence in residential sales would be a buyer involving a home inspector, do a home inspection. However, with commercial real estate due diligence is far more expansive, particularly with large complex transactions. Prospective commercial buyers must carefully assess all risks associated with a business and or property acquisition with particular emphasis on factors impacting ongoing and constantly.
Due diligence typically focuses on financial legal, structural planning and environmental considerations most are customized to suit individual circumstances, but ultimately the goal is full knowledge of relevant facts. Due diligence can range from a straightforward, direct inquiry by the prospective owner to a team of accounting, legal planning, and other professionals scrutinizing every aspect of the business or investment property and developing a substantial, customized audit.
Commercial transactions usually provide for a relatively open-ended provision and usually, it can take between 10 and 120 days or more giving the buyer wide-ranging access to transaction-related information available through public sources as well as detailed documentation that has been supplied by the seller.
The buyer typically has a right to simply walk away from the transaction if anything discovered does not meet the expectations as long as it’s within that due diligence. No standard clause is used as the scope of material needed at a time period may vary. Ultimately the goal is full knowledge of relevant facts relating to the purchase.
All documents must be closely examined along with a thorough inspection of the property. Once this has been completed, the buyer can either waive or fulfil their conditions or they can walk away from the transaction complete. I hope I helped teach you guys here, something today about due diligence.
Thanks again for tuning in for this month’s quick tip video as always. If you have any questions, please do not hesitate to reach out.