Due diligence usually refers to the time after signing a contract that the buyer has to inspect the property and make a decision whether they want to buy the property or lease the property or otherwise go forward with the transaction.
It’s important during due diligence period that you gather all of your information. You have to get your inspections done, you have to get your environmental inspections done, you have to gather all the documents that relate to the property, you have to do your zoning checks and you generally have to be one hundred percent certain that you are going to go forward with this deal.
If you don’t gather all that information, when due diligence expires, your deposit money may become non-refundable. Before due diligence expires, you can still walk away. It’s what’s also called a Free Look Period. It’s important to have a good broker and a good team of professionals around you to conduct all of these inspections, gather all of the documents, tell you what everything means and advise you whether you should go forward or not. A good broker will quarterback all of these players and make sure that everything is done timely and keep you on track.
The scope, intensity and focus of any due diligence investigation of commercial real estate depends upon the objectives of the party for whom the investigation is conducted.
A “Due Diligence Review” will address issues important to the Seller, Developer and Lender including:
- WHAT IS CONSIDERED TO BE “THE PROPERTY”
- PURCHASE PRICE & OTHER CONSIDERATION
- BUILDING INSPECTION
- THIRD PARTY SERVICE AGREEMENTS
- EXISTING LEASES
- PURCHASER FINANCING
- ENVIRONMENTAL ISSUES