This post originally appeared on Burt M. Polson's Real Estate Journal and is republished with permission. Find out how to syndicate your content with theBrokerList.
If you are purchasing real estate, you probably want to know what you are getting yourself into and perform due-diligence.
I purchased a used truck and was able to negotiate what I thought was a good deal–only if I knew then what I know now I would have passed.
I soon discovered after closing the deal that my truck was driven hard during the first few years of its life in the Canadian wilderness by a contractor for the oil business. You can imagine the hidden wear and tear about every inch of the truck experienced. Well, I do not have to imagine–I have become good friends with my mechanic.
I learned several lessons from my experience such as validate information, research thoroughly, hire professionals to inspect, and the best option may be to avoid the situation altogether.
The same goes for real estate, but thank goodness I am much better at buying real estate than used trucks. Much is knowing what to look for, what can go wrong and whom to call to give you an experienced review.
Due diligence and contingencies go hand-in-hand
You will find due diligence a part of most real estate transactions. Perform your due diligence for both residential as well as commercial real estate in the form of completing investigations and reviewing disclosures from the seller.
A real estate purchase contract will have a contingency as part of the buyer’s inspection period which could range from a few weeks for a home to several months for a commercial transaction. The contingency allows the buyer to either ask the seller to remedy the situation or cancel the contract if something is discovered.
What are the due diligence items for a residential home purchase?
The seller will usually provide a buyer with many disclosures, which will include the transfer disclosure statement, seller property questionnaire, natural hazard disclosure and a few others.
The buyer will have the right to review all the disclosures and cancel the contract if there is something found they did not expect.
The buyer can then perform their own inspections which could include a physical home inspection, wood destroying pests and organisms inspection, chimney and fireplace inspection, structural and foundation inspection, roof inspection, pool and spa inspection, septic inspection, well inspection and test as well as others.
There are many more potential inspections for commercial transactions
In addition to some of the inspections a buyer could pursue for a home, a commercial property includes many more. Here is a list of some of the more common: fire sprinkler inspection, soil inspection, land survey, environmental report, structural/engineering inspection, HVAC (heating-ventilation-air conditioning) inspection, phase 1 and 2 environmental survey, electrical systems inspection, plumbing systems inspection, geologic inspection, ADA (Americans with Disabilities Act) compliance survey, asbestos hazards testing.
Then there is the due diligence you should perform not related to the physical nature of the property such as zoning review, past building permits research and use permits analysis.
Performing thorough due diligence of your real estate purchase is a complicated process your broker will orchestrate for you, so you fully know and understand what you are purchasing.
Burt M. Polson, CCIM, is an active commercial real estate broker. Reach him at 707-254-8000, or [email protected] Sign up for his email newsletter at BurtPolson.com.