Law Office of Henry B. LaTorraca Civil Trial Attorney

Due diligence in a real estate transaction

People in California who are interested in entering the thriving commercial real estate market may want to ensure that they pay sufficient attention to the due diligence process. A buyer looking to invest in a real estate project wants to avoid being mired in a problematic site with ongoing issues or legal concerns. This means investigating the integrity of the building itself, checking for zoning compliance and adherence to environmental regulations, reviewing the title to the land and studying the records of the developer or seller.

In particular, potential real estate investors may want to check that the developer actually has the cash flow projected and assess their responsibility for liabilities on the property. By thoroughly reviewing the property for sale or investment, buyers can make an informed decision about where to put their money. In addition, during this period of time, the interested buyer can also line up financing for his or her purchase. When the due diligence process's results are more negative than expected, but the buyer remains interested, it may be an occasion to reopen negotiations about price. Without reaching a new agreement, the potential deal may be canceled.

While the due diligence period may begin with a purchase agreement, it could also start earlier when an offer or letter of intent is submitted. This can help speed the process along. In most cases, sellers will want a shorter due diligence period in order to complete the sale quicker.

When entering the commercial real estate market, it is critical for a person to fully understand the property in which he or she is investing. Due diligence can be a major tool in ensuring a positive transaction. A real estate lawyer can work with a potential buyer to represent his or her interests and negotiate fair contracts that provide a strong upside to the client.

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