It is always wise to know what you are buying. From inspecting eggs in a grocery store, to looking over a new car for scratches, thorough investigation benefits the buyer so that he or she can be confident in the product he or she is buying. Nowhere is this more true than in real estate transactions. Due diligence in a real estate transaction is the act of thoroughly investigating all components of the transaction, including the property, seller and financing.
An essential question to ask in the course of due diligence is: what rights to a property will a buyer have once he or she obtains the property? A future Arizona property owner will want to ensure that the property can be used for the purpose he or she intends. To answer this question, the potential owner should seek to thoroughly vet the property. This process can include reviewing insurance policies, title insurance policies, zoning or licensing restrictions, as well as any leases that might transfer with the property.
A buyer should make sure that a seller owns the property at issue, as well as has authority to sell it. Documenting the seller’s financial situation, particularly to ensure that the seller is not in bankruptcy, is essential. Obtaining utility bills, loan documents and service contracts related to the property may help to illuminate the seller’s use of the property.
Finally, it will benefit a buyer to be knowledgeable about the financing necessary to complete the transaction. There may well be hidden costs or possible liabilities, and it is better to be aware of these prior to the closing of any real estate transaction.
The transfer of property requires attention to detail to confirm that a buyer obtains a desired property that can be used for the intended purpose at the intended cost. An attorney experienced with the intricacies of Arizona real estate transactions can help guide a potential buyer through this process to ensure that due diligence is properly completed.
Source: The National Law Review, “The Basics of Commercial Real Estate Transactions: Due Diligence,” accessed May 16, 2015