Homebuyers who do their ‘due diligence’ and investigate the property they plan to buy for potential problems can save themselves a great deal of trouble and cost fixing them after they’ve moved in. The process of ‘doing your homework’ can also help confirm that you still want to buy the property. Arsen Krekovic, real estate litigation lawyer with Hoogbruin & Co., stresses this as a critical process. Buyers should perform their due diligence before committing to a real estate property. It means investigating and gathering relevant information to assess a property’s suitability, potential risks, and legal obligations. In today’s post we look at the components of due diligence and also the common reasons home buyers may overlook and necessitate legal guidance as a result.
Steps to due diligence is in relation to real estate property
- Obtain Property Inspection Reports
Vital to due diligence is obtaining a comprehensive property inspection report.
This report is conducted by a professional home inspector who evaluates the condition of the property, identifies any existing or potential issues, and provides an overview of its structural integrity.
Note: Buyers may overlook this step due to the assumption that the property appears to be in good condition on the surface or to save on inspection costs.
- Review Title Documents
Review title documents and you’ll understand the property’s ownership history, any existing liens or encumbrances, and potential legal issues.
This step helps ensure that the seller has clear ownership and the legal right to sell the property.
Note: Buyers might overlook this process if they rely solely on the seller’s representation or fail to understand the importance of title searches and legal documentation.
- Verify Zoning Restrictions
Understand the zoning restrictions and regulations that apply to the property to know how the property can be used, whether for residential, commercial, or mixed-use purposes, and if any restrictions or limitations apply. Note: Buyers may overlook this step due to assumptions about the property’s permitted use or a lack of awareness regarding the potential impact of zoning restrictions on their intended use of the property.
Home buyers often overlook Due Diligence for these reasons
In the pressured environment of BC real estate market, home sellers and buyers alike, may find they need to seek the counsel of a real estate litigation lawyer. This may be for any number of pitfalls that give rise to legal issues. These may be due to simple human reasons such as:
- Time Constraints – when buyers or their agents are pressured by tight timelines. These may be due to competitive markets or time-sensitive offers that cause them to rush through or skip due diligence steps.
- Lack of Knowledge – Novice buyers or those unfamiliar with the real estate process might not be aware of how important due diligence is or the specific steps involved.
- Trust and Assumptions – As noted above, buyers may simply feel a sense of trust in the seller or assume that everything has been disclosed, leading them to forgo thorough due diligence.
- Cost Considerations – Saving upfront costs may be a choice for some buyers may choose to skip certain due diligence steps. They may save money on inspection fees or legal fees, but this may result in more significant financial burdens down the line if issues are discovered post-purchase.
The prospect of owning a new property, whether for investment, commercial use or feathering a fine residence, can be exciting. And, in BC’s fast paced and sometimes high stakes real estate property market it can be overwhelming.
If due diligence fails, or you find faults in the transaction see help from a real estate litigation lawyer
Due diligence can add important information that may impact home buying decisions in the moment or save time and expense long after the purchase has been concluded. If in doubt, consult a real estate litigation lawyer, to assist you with the potential risks associated with insufficient due diligence. Arsen Krekovic, Hoogbruin & Co.’s real estate litigation specialist stresses the importance of the full scope of due diligence and has helped clients mitigate risks and make informed decisions when purchasing a property or resolving issues where court action may be required.