When Does Commercial Mortgage Due Diligence Process Start And How Long Does It Take
Caveat Emptor: "Let The Buyer Beware" due diligence in commercial real estate purchases is critical so the buyer verify all of the material facts represented by the seller.
By: Winston Rowe and Associates
Due diligence should always occur prior to signing the purchase and sale contract.
A typical commercial mortgage due diligence period for a property is between 30 and 60 days. Longer or shorter periods of time are often negotiated depending on the parties' particular needs.
If you are considering the purchase of commercial real estate, either for your business or as an investment, you should include a due diligence period as a crucial element in your negotiations and in the contract.
The acquisition of commercial real estate requires intensive due diligence to uncover key information that may not be readily apparent or available in evaluating the value of a property or portfolio. Such hidden details can doom the financial merits of an otherwise profitable deal, turning the transaction into a costly mistake.
Many sophisticated commercial real estate investors consider it a best practice to commence detailed due diligence before the purchase contract is signed. The alternative is to carefully lay out in the contract for sale the items of due diligence that the buyer must undertake and the time this will take.
This also serves to compel the seller to deliver required documents on an expeditious basis. Certain findings may adversely affect the acquirer's anticipated financial return, giving buyers a stronger hand in the transaction negotiations to ensure a fair and accurate property valuation, given the risks that have been unearthed.
Winston Rowe and Associates prepared this article, they specialize in providing due diligence services for commercial real estate investors nationwide.
You can down load their free book "Commercial Real Estate Finance" at their website at https://www.winstonrowe.com
Winston Rowe & Associates