In the United States, before a financial transaction is finalized, due diligence is usually carried out. But what is it? It is an audit that evaluates the legal, technical and economic situation of an asset or company before acquiring it. Looking to buy property in Florida? Learn all about real estate due diligence.

This report is key when doing real estate business in highly valued sectors such as South Florida, as it allows you to establish the risks and opportunities of your investment.

What to take into account when doing a real estate due diligence

Real Estate Due Diligence

If you’re buying a house or apartment in or around Miami, you need to get a complete picture of the property situation to avoid setbacks. Here are the main aspects of due diligence:

What is your procedure?

Normally, due diligence is carried out by lawyers who are experts in real estate law. It is usually elaborated in the negotiation phase of the property, following these steps:

  1. Review of the property’s documentation: includes any legal certification that endorses compliance with current regulations.
  2. Property inspection: A team of construction experts visits the property to assess its structural condition.
  3. Implementation of technical tests: these are evaluations to verify the quality of the building. They help detect insulation problems, moisture, leaks, or any other signs of deterioration.
  4. Risk assessment: This consists of identifying the risks associated with the property, such as lack of permits, inheritance issues, environmental impact, etc.
  5. Preparation of a technical report: once the previous steps have been completed, the experts prepare a report with the data collected so that the buyer obtains a general overview of the situation of the property.

Costs of a real estate due diligence

In the United States, there is no fixed rate for real estate due diligence; however, this expense always represents a percentage of the property’s sale price.

Thus, in general terms, the cost ranges between USD 5 thousand and USD 200 thousand, depending on the value of the property. Keep in mind that the fee also varies depending on how thorough the study is.

Documentation to be submitted

At the time of carrying out this study, the owner of the property must gather a series of documents related to the property:

  • Plans of the work.
  • Building licenses, permits, and inspections.
  • Certificate of occupancy.
  • Building restrictions, fines, and violations.
  • Mortgages, rent rolls due to current lease agreements, liens and taxes pending payment.

Benefits of Real Estate Due Diligence

This document offers important advantages to real estate investors:

  • It allows you to check that the property is debt-free.
  • It avoids delays in the purchase due to probate processes and possible litigation in the future.
  • It can help you make valid arguments for better prices in the negotiation process.
  • It supports decision-making in the preparation of a property for sale. For example, the need to undertake structural reforms or simply do home staging.

A real estate due diligence guarantees transparency when investing in real estate. Use it strategically to buy homes for sale in Miami under the most advantageous conditions.

References

BibLus. (2023, October 6). Real estate due diligence: what it is, how to do it, and why it’s important. https://biblus.accasoftware.com/es/due-diligence-inmobiliaria/

Spanish. (2020, January 22). The due diligence of a property. https://www.elespanol.com/invertia/empresas/inmobiliario/20200122/due-diligence-inmueble/461705418_0.html