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What is due diligence when it comes to commercial real estate?

On Behalf of | Nov 18, 2020 | Firm News

Due diligence often refers to anyone’s earnest investigations, but in regards to real estate, it exists as a step of negotiation and sales. The phrase “buyer beware” may elicit images of consumer goods and broken products, but that adage also matters when purchasing or renting a new space for your business. 

As Forbes describes, due diligence is a critical step that balances speed with comprehensive investigation. 

Bidding with money and time

When you approach with intent to purchase commercial real estate, you put forward an estimated amount of time to commit your due diligence — the weeks-long or even months-long process you use to find out everything about the land and buildings involved in the property. Taking more time allows you a wider window to investigate, but a seller may consider someone else with a shorter timeline instead. 

Looking under every rock in the garden

Due diligence does not just include a physical inspection of acreage or construction but encapsulates everything from legal hiccups to contractual obligations. You do not want to find yourself a brand new business space that saddles you with thousands of dollars in owed payments. Worse still, the documents a seller gives you may provide inadequate information about what to expect. For example, an account of 12 months worth of receivables may obfuscate information that a 36-month account reveals. 

Getting the information you need

Any and all documents to help ease you into a new business may make your life easier and taking time out of your busy schedule to do something you may not know the most about is a poor real estate foot to start on. Make sure you know what due diligence means for you and how best to approach this critical step.