Thursday, January 7, 2016

Property Due Diligence

In considering the acquisition of a property, it's wise to take the time to evaluate the building/site on a top-down basis. Typically this is done during a 'conditional period' within your Agreement of Purchase and Sale, and it facilitates your investigation of the property on a number of fronts.

Some of the more common elements of a due diligence review can include the following:

Physical Condition - which should be undertaken by a qualified building inspector or possibly an engineer/architect. Normally this is centered around issues relating to the structural condition (i.e. roof) of the building, electrical/plumbing systems, heating/cooling equipment, and site improvements (i.e. parking lot). The goal is to do a 'top -down' review of the property to determine any deficiencies which will be assumed PRIOR to firming up your purchase agreement. Keep in mind that any deficiencies which are assumed, become expenses which ultimately get added to the acquisition cost.

Environmental Review - normally handled by an environmental consultant within your jurisdiction. Even though it is generally a requirement for mortgage financing purposies, it is generally a good idea to complete one in order to establish a 'base line' position on the property on a go-forward basis. The details of such reports will vary from property to property, as will the costs to complete them. Environmental problems can be expensive to remediate and correct after the fact, so the reviews are most often well worth the investment.

Title Review - this is an exercise best completed during the due diligence process. It should reveal any easements, property restrictions, and lien/encumbrances which affect the property and ultimately your use of it. The bottom-line here, you want to ensure that there are no title matters affecting the property that you are ultimately UNABLE or UNWILLING to accept. It's a good practice to complete it during the conditional period.

Other reviews might include building code/zoning matters, special designations (i.e. heritage), equipment inspections (i.e. cranes).

Dollars spent in conducting good due diligence, is generally money well spent and well worth the investment. 'Caveat Emptor' lives on in the real estate world ... be an Aware Buyer!

Feel free to comment on any of your recent experiences with property due diligence -- the good, the bad, and the ugly. Look forward to connecting with you on any investment opportunities here in Windsor-Essex -just give us a call or connect through our website.

Mark Lalovich
Office: (519) 966-0444
Cell: (519) 259-5434

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