Due diligence is doing your homework before buying property. It involves investigating and collecting facts about the location of the property. You will also collect information about the physical and financial condition of the property.
With adequate information before making a purchase, you will structure an offer that will make good business sense. Otherwise, you may later regret paying more than you should on a property.
You need to update yourself on the disclosure laws of the state in which you are buying property, as every state has its real estate disclosure laws. Read up and consult a real estate lawyer together with your real estate agent so they can answer any questions.
In many states, there is a requirement that sellers disclose any discernable home defects they are aware of. These include roof, plumbing, or electrical defects. However, this may not be a requirement in other states. The buyer must ask questions that the seller must be truthful about. It is a caveat-emptor or let-the-buyer-beware situation.
Check the address online and see if there is any news about the area or the property itself. Look for any news that could affect you in the present or future. The internet is a good source of due diligence information. Talk to the neighbors; there may be some information they may share that you need to know.
It is important to read this statement before you make an offer rather than after. Request the seller’s disclosure statement and go through it. It helps you know what the seller knows. There may also be some information you would find out that they may not know. If you have any questions, make sure you ask. There may be some things that may make you pull back from making an offer.
The building department in a state or city knows quite a bit about the property you may be buying. They will tell you about issues that may affect the value of the property you plan to buy. This includes information on permits for work on the property. Otherwise, you may pay the price in the future.
It is especially important to remember to do this if you are paying cash for the property. If you are getting financing, this is one of the requirements of the lender. You can also avoid any issues that may arise by getting title insurance.
Get to know if the HOA is an organization you want to be part of or tolerate. Review their rules, financial statements, and spend some time with their managers.
Get to know what other uses are there for your property and your neighbors' properties. It will help you be aware of any drastic changes that may likely take place. You can then decide on whether to get the property. Also, make sure that your property meets the current zoning regulations.
If you want to buy property in an area that concerns you, get an environmental site assessment. In the future, you can be responsible for any environmental issues that arise even if you are not the cause. It is always wise to carry out this assessment before making the final payment.
For more information on due diligence for real estate, visit Randazzo Builders Inc. at our office in Sorrento, Florida. You can call (888) 281-4983 today to schedule an appointment.