Due Diligence That Must Done in a Real Estate Transaction

 Posted on June 24, 2022 in Real Estate

Investments in real estate can be very lucrative. However, there are a variety of concerns that will need to be addressed when purchasing real property. If a buyer will be assuming ownership of property that tenants currently occupy, they will need to be prepared to assume existing leases and understand any other contracts that are in place. Those who are planning to embark on a real estate development project will need to ensure that they have the proper construction permits and are in compliance with all applicable laws and regulations. To ensure that all of these issues will be addressed correctly, it is crucial to work with an attorney who can help perform due diligence during a transaction.

Issues to Address When Performing Due Diligence

An investor can protect their financial interests by gathering all information needed to ensure that they fully understand the risks and benefits of a commercial real estate transaction. In many cases, a person will have 30 days or less to perform due diligence, so it is essential to act quickly to uncover any issues that may affect a transaction or impact an owner’s ability to receive the proper return on their investment.

While the forms of due diligence that may be performed will vary depending on the type of property and transaction, an investor will likely need to address issues such as:

• The physical condition of the property - A physical assessment of the property can determine whether there are any repairs that will need to be made or any other issues that will need to be addressed, such as renovations to comply with building codes. This assessment can also help an investor estimate the costs to develop the property, such as demolition of existing structures and construction of new buildings, parking lots, or other improvements.
• Financial concerns - Audits of existing leases and contracts will ensure that an investor understands the income that is currently being received, the costs of various services, and the potential opportunities for cutting costs or generating additional income.
• Legal issues affecting the property’s title - A title search can uncover any encumbrances that may affect the ability to transfer ownership of a property, such as liens or easements. A survey of the property may also be performed to provide a complete understanding of the boundaries, neighboring properties, and development opportunities.
• Construction permits, zoning laws, and environmental regulations - To ensure that investors have a full understanding of any issues that may arise during a development project, it is important to review any laws and regulations that may apply to a property, including those that limit how a property may be used. A developer can also determine whether they may encounter any issues as they seek approval to perform certain types of construction.

Contact Our Lake County Real Estate Due Diligence Attorney

Since there are so many complex factors that can play a role in a real estate transaction, it is crucial to work with an attorney who can identify and address any legal issues that may arise. At Newland & Newland, LLP, we have represented clients in transactions involving purchases and sales of a wide variety of properties. We can help perform due diligence and ensure that your concerns will be addressed efficiently and effectively. Contact our Libertyville real estate attorneys by calling 847-549-0000 for a free consultation today.

Sources:

https://www.pmainc.com/news/post/defining-due-diligence-in-commercial-real-estate

https://origininvestments.com/2018/11/20/5-steps-to-take-when-conducting-due-diligence-in-commercial-real-estate/

https://millmanland.com/knowledge/commercial-due-diligence/