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Due diligence in commercial property transactions

On Behalf of | Jul 5, 2017 | Uncategorized

Commercial property buyers in Missouri and around the country may be drawn to an office building, retail store or warehouse because it is located in a thriving area or has the potential to provide solid returns, but they will usually wait until due diligence efforts have been completed before making any kind of commitment. During the due diligence process, commercial real estate investors seek to learn more about the financial, legal and physical condition of properties.

Due diligence protects both buyers and sellers. Learning about property defects allows buyers to make more informed decisions, and full disclosure also shields sellers from liability and potential lawsuits. However, the process can be demanding because buyers must often complete it within 30 days of making an initial offer. Thorough due diligence involves gathering documents such as financial statements showing rents and expenses, conducting soil tests and environmental site assessments and performing a comprehensive physical inspection of the property in question.

It may be wise to study building plans, engineering drawings and the results of previous appraisals before a physical inspection takes place, and inspectors should pay particular attention to structural problems that could be expensive to remedy. Once these steps have been taken, buyers will generally have the right to withdraw their offers if they are not happy with what they have learned. They could also use this information to negotiate a better price or more attractive terms.

Attorneys with experience in commercial property transactions may be able to guide real estate buyers and investors through the due diligence process and help them to avoid common pitfalls. Attorneys could also scrutinize legal and financial documents to ensure that buyers have a clear understanding of what they are getting into and check title reports for encumbrances and defects.