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Due Diligence in Commercial Real Estate Transactions

Due Diligence in Commercial Real Estate Transactions
Due Diligence in Commercial Real Estate Transactions Photo by Ludovic Charlet on Unsplash
Due Diligence in Commercial Real Estate Transactions
Due Diligence in Commercial Real Estate Transactions Photo by Ludovic Charlet on Unsplash



The acquisition of commercial real estate is often riddled with complex issues. Before closing on any purchase, a buyer needs to be thorough in his/her due diligence. It is imperative that the buyer learn as much as he/she can about the property, existing conditions and restrictions, title issues, zoning ordinances, tenants, existing leases, and environmental hazards. In addition, the buyer is expected to review all contracts, liens, and other contracts filed with the county recorder’s office, review fair market values and valuations and interview all existing and prospective tenants. There are a number of real estate agents who can help. Here

Below is a list of 20 items that should be part of any due diligence investigation:

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1. Identify any underground or above-ground storage tanks;

2. Determine if any materials or substances have been released or disposed of on the property;

3. Determine if asbestos has ever been located on the property; if so, obtain information regarding the removal/disposal process;

4. Obtain test results for radon and any remediation;

5. Obtain test results for drinking water;

6. Determine whether lead paint issues exist;

7. Identify record owners of the property and trace past record owners to insure chain of title;

8. Review leases of tenants;

9. Obtain from the seller any plans, surveys, or diagrams regarding the property;

10. Investigate property’s compliance with zoning and land use regulations;

11. Conduct a physical inspection of the property; obtain copies of any inspection or engineers’ reports from the seller;

12. Get up-to-date rent roll;

13. Obtain copies of the last five years’ property tax bills;

14. Determine the necessity for termite and mold inspections;

15. Obtain any service contracts;

16. Evaluate insurance needs;

17. Obtain all necessary approvals and permits for the intended use of the property;

18. Review copies of title insurance policies from the seller

19. Obtain title commitment/Order judgment and lien searches

20. Have legal representation throughout the transaction.

Source by Joshua Marks

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