Due Diligence

The Chinese have two brush strokes that combine to form the word “Crisis”. One stands for danger and one stands for opportunity.

I like this term because it illustrates the nature of some outstanding opportunities in this economic climate to purchase real estate; and those who can should take advantage of this “buying window”.

There has never been a better time for an occupant to take advantage of the 90% leverage SBA loans and a great time for astute investors willing to take a prudent risk.

How to protect yourself when purchasing new real estate becomes a lot simpler after you put together a Due Diligence road map to assist you in accomplishing your real estate goals.

The following is a Due Diligence list to help you formulate your buying strategy:

  1. Know your market; Educate yourself; Loopnet and MLS; Review all your options; Drive the neighborhood and area.
  2. Make sure you understand the sales contract (every clause, don’t just sign).
  3. Access your Buying Power, and know all your options – talk to a few lenders; get the best option. UNDERSTAND THE PRE-PAYMENT PENALITIES in your loan documents.
  4. Be present for the physical inspections – be there if possible to observe, report, and ask questions.
  5. Review the preliminary title report; go over each item; obtain microfiche detail of all exceptions, easements, etc.
  6. Review a copy of CC&Rs, association documents, all leases documents. Make sure you understand all options that run with the leases.
  7. Check closing papers for interest, bond and tax prorations.
  8. Verify size of site, the building and property boundaries.
  9. Check if property is in Alquist-Priolo area and/or Federal Floor Insurance map area. Make appropriate disclosures to Buyer and Seller. Provide a Natural Hazards Disclosure Report.
  10. Buyer to obtain a Phase I investigating the hazardous waste risk for all sites and of all buildings, if necessary.
  11. Check the deed for correct legal description of what property is being conveyed. Very important!
  12. Make sure the Liquidated Damages Clause are initialed and written in a bold type or on a separate sheet.
  13. Obtain environmental clearance, zoning verification,and General Plan compliance.
  14. Make sure you obtain Estoppels indicating the leases are in full force and effect, if applicable.

Don’t hesitate to hire a qualified professional to lead your team! Don’t wait to buy real estate and wait; BUY REAL ESTATE AND WAIT.

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