Monday, September 21, 2009

Due Diligence and Commercial Real Estate Purchases

Commercial real estate purchases often involve a greater investment than private real estate purchases; therefore, a buyer needs to ensure that she has gathered as much information about the property as possible. Buyers must perform due diligence to eliminate any surprises after the transaction.

Buyers must perform due diligence in two areas: the land itself and the structures on the land. Regarding the land, the buyer must be aware of any past land use, any zoning regulations attached to the land, and any easements or encroachments on the land (just to name a few). Regarding the structures, the buyer must inquire into the applicable building codes, perform inspections, look for structural problems, and determine if there are any environmental issues such as asbestos or lead.

As Prof Emerson says, "there is no bad business deal insurance." Buyers must perform due diligence to prevent headaches and financial disaster after the purchase.

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