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The focus of your due diligence depends on your intentions

On Behalf of | Mar 15, 2018 | Blog

Part of your business model may include purchasing a piece of property. Perhaps you already found the right place and put in an offer that the seller accepted. You probably spent a significant amount of time negotiating your purchase and sale agreement, which included contingencies.

More than likely, finalizing the purchase depends on the results of your due diligence. The path you take during this phase of the process remains influenced by your goal with regard to the property from beginning to end. The issues important to you depend on whether you intend to occupy, develop or invest in that particular piece of real estate.

How your intentions influence due diligence

The questions you ask vary based on how you will use the property. Your intent under the three main categories of land ownership could mean you focus on the following:

  • If you intend to occupy the property, you will more than likely focus on whether it fits your needs both now and in the future.
  • If you intend to develop the property, your focus shifts to whether the property fits your plans and has, or you can obtain, the proper permits to complete the project.
  • If you intend to invest in the property, you will want assurances that the property will continue to generate stable and sufficient income into the future. You may focus on current leases and the potential for leasing the property to other tenants, if necessary.

Keeping these uses in mind, you will probably focus on different aspects of your due diligence.

Factors to consider during due diligence

Regardless of your intention for the property, you may consider the following factors:

  • Zoning and land use issues can affect whether owning the property accomplishes your goals.
  • Do the physical features of the property meet with your needs? Are there encumbrances, easements or any other restrictions in the title search that could affect your intended use of the property?
  • Does the seller have the legal right to sell the property? It may surprise you how often this problem arises.
  • Financing issues could arise that impede your ability to acquire the property.

These are just some of the considerations during this phase of the purchase. Your particular circumstances will affect what you look for when it comes to each of them. Whether this is your first purchase or your tenth, each one presents its own challenges. You may benefit from some assistance in ensuring that all of your questions are sufficiently addressed and answered prior to completing the transaction.

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