Today we’re continuing our discussion on due diligence in real estate with part 2. Thanks so much for tuning into the real estate today podcast.
I’m Bob Nelson real estate investment broker with Pacwest Real Estate Investments. I’m Marcia Edwards, residential broker with Windermere Real Estate.
Marcia Edwards: We’ve been talking about the due diligence process in purchasing real estate. Due diligence is basically giving the buyer the time and space necessary to understand what as-is is. In fact, now that they’ve written an offer, and they’ve got a pending sale, there’s a period of time that’s allowable and understandable and relevant, it’s the due diligence period.
In residential it’s 10 to 15 business days allowable for you to really take a closer look with the experts by your side.
Bob Nelson: With commercial real estate depending on the product type, it could be longer than that and it also is a function when do those days start? I’m going to request copies of leases, any appraisal reports, geotech or soil reports, and so forth that would tell me what I should know about this property.
Now, if you drag your feet and don’t get that stuff to me for 20 days, the time for me to evaluate it doesn’t start until then, and I’ve seen that over and over again, that seller provided information comes in in dribbles and pieces and I hate it that way if I’m a buyer’s broker, but that’s the way it is. You have to give the buyer a sufficient time to figure out is this thing what I thought it was when I made the offer?
Marcia Edwards: So as you may have picked up on when working with Bob Nelson, he recognizes he needs to write this offer saying, once we have the information in hand, then our clock starts for the buyer’s side. That makes a lot of sense.
In residential real estate it’s a little bit different, it is most often put on the shoulders of the buyer to order those inspections, bring their own experts on site, and understand what they’ve got there.
Now, the seller’s obligated to provide a seller’s property disclosure statement which is it’s dumping what you have in your brain and knowledge for the history of the property as the current owner, and you provide that to the buyer as quickly as possible in the transaction. So there is some presentation on the seller’s side, but the clock on that, again, doesn’t start until it gets in the buyer’s hand for their review of the seller’s property disclosure.
Bob Nelson: It’s a tough situation because the buyer is being pressured, because there are other buyers that will typically be after the same property. You have to move quickly. More quickly than comfortable? Yes, always more quickly than comfortable, but again if you’re using a buyer’s broker, a person who’s familiar with that product type, it becomes much easier because it’s not their first rodeo. It may be yours. It’s so infrequent that you buy things, you don’t have that expertise.
Marcia Edwards: Also, the due diligence is not only to the subject property, it’s what attaches to the property in title and in responsibility in the surrounding area like neighborhood associations.
So there’s more to share on this next program, I’m Marcia Edwards, Windermere Real Estate.
Bob Nelson: And I’m Bob Nelson, real estate investment broker with Pacwest Real Estate Investments.
Join Bob Nelson and Marcia Edwards Eugene, Oregon, real estate experts daily at 5:30 on KPNW for the “Real Estate Today ” radio show.