Due Diligence = Dating to Live Happily Ever After With Property!
Real estate due diligence, like dating is necessary to find the “One”…property. :)
Normally, when you sign a contract to buy a property, the contract allows you time to get to know the property to find out if it is right for you.
This time is called the “due diligence period.” Due diligence periods are normal when you sign a contract to buy any kind of property – whether it’s a condo, house, office building etc.
Check out the 7 reasons Due Diligence is Liked Dating:
- You are “just friends”… with the property. You made the first move by signing the contract, but you and the property don’t have a legal commitment to stay together. You don’t own the property during this time. The benefit is you don’t have to take care of the property (pay taxes, maintenance, and insurance). But, since you don’t own it, you can’t tell the property want to do (who to rent to, how to operate).
- You invest Time and $$. To get to know a property, you will probably spend time with it and money to get know it by ordering many expensive reports including environmental reports, title reports, physical inspections, soil inspections, structural inspections etc.
- Don’t Fall In Love with the Bricks! Your Momma told you it’s about what’s on the inside and this is especially true for property. Do you love the numbers in the financials you find inside the books? Choosing a property with the right numbers and financials is a choice that will take care of you in the future. (This will be discussed in an upcoming blog!)
- You want to avoid Drama. You want to make sure that if you commit to buy the property, it won’t cause you future drama, so you should get to know the structure of the buildings, the environmental background and understand all the costs/risks of owning and operating the property.
- You have to kiss a lot of frogs. Due Diligence takes time, you may have to get to know a lot of properties before you find the one that is right for you (works for your financial requirements and risk tolerance).
- Time Your Break Up. Its important to know when to break up. In real estate you want to break up before your deposit goes “hard,” i.e. before you can’t get your deposit back if you go any further. You may upset some people by this beak up like the Seller and the Broker who was depending on this deal. Try to be gentle with the people you upset. Karma is out there and the real estate world is small and you will most likely work on another deal with the same people in the future.
- Beware, Don’t Kiss and Tell! If you decide the property is a “Keeper,” you want to keep the deal to yourself, don’t tell people how good it is until you’ve committed. Otherwise, other buyers may make back up offers that will reduce your ability to negotiate.
If you want to live happily ever after with your property, stay tuned and read my upcoming blogs about what to look out for during due diligence!
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Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright © 2012 Suzanne Hollander, Professor Real Estate® The People’s Professor.