commercial real estate for saleIn each conveyance of commercial real estate for sale, it is wise for a potential purchaser to conduct due diligence towards investigating the physical and intangible qualities of the property. The depth of the investigation may vary; however, the logic for the investigation remains the same. You need to have a thorough understanding of the potential risks in order to adequately determine the value of the property.

Preliminary Due Diligence 

A critical step in the process is the preliminary due diligence prior to drafting a letter of intent, which outlines the terms of a prospective offer, is the site visit with the sellers and real estate brokers present. This preliminary step should be given your full attention because it represents your opportunity to establish connections that will streamline the efforts to obtain crucial information on the commercial real estate for sale.

In addition, it gives you the chance to ask some questions and gauge the responses, thus pointing to potential investigative paths which may shed light on hidden risks. In casual discussions on a site visit, you may recognize negative reactions to certain sticking points related to representations, warranties or provisions of the property-related data.

Review of Seller Documents 

Once the contract is signed, you have a short period of time to gather as much information you can while keeping cost efficiency at a maximum. We recommend obtaining the following list of documents and information as a minimum to conduct appropriate due diligence. Depending on the type of building, the list should include:

  • All current uses of the property
  • Current tenant information
  • Surveys of the land
  • Third party inspections or reports initiated by seller
  • Seller’s policy of title insurance
  • Condominium documents
  • Notices of threatened or pending litigation
  • Notices of governmental actions related to the property
  • Notices of special assessments
  • Notices of new taxes
  • Notices of environmental issues
  • Copies of current bills related to the property
  • Evidence of zoning
  • Service contracts
  • As-build specifications and plans
  • Evidence of insurance
  • Construction related documents
  • Construction related warranties

You and your agent should thoroughly review these documents to identify any potential risks which may require deeper investigation.

The goal in this process is to ensure that the property meets the representations of the seller and is actually the property you think you are getting. Every transaction has a unique set of hurdles and considerations. When you have the right information and guidance, you are on your way to making a sound acquisition.

Menlo Commercial Real Estate can assist you with the due diligence process. We have the depth of experience and knowledge of the Mesa market that you need. Contact us today at 480-659-1777 or email us at info@menlocre.com to get connected with an agent.