The due diligence period is a crucial time for any commercial real estate buyer. Commercial properties, unlike residential real estate need a thorough examination and judgment in order to ensure that the purchase is at an acceptable price. When conducting due diligence, buyers arrange for structural and environmental inspections, along with building and mechanical ones. They also obtain property tax records, confirm zoning restrictions and check for the past liabilities of previous owners.
The contract usually includes a timeline for completion of due diligence. Due diligence documents might be delivered within seven or fourteen business days of the contract acceptance date. The deadlines offer both the buyer as well as the seller the chance to settle any issues that may arise during the due diligence process.
Another important date is the association documents termination date – the date when buyers can end the contract if they find information in the HOA documentation that makes the project unfinancial for them to pursue. It usually happens 10-14 business days following the MEC. The contract also sets an objection resolution deadline – the date at which the seller and buyer have to find a solution to any issues that the seller hasn’t successfully addressed. The contract will automatically expire when no solution is discovered by the deadline. If the information discovered during due diligence is so damaging that the buyer needs to seek a “Notice to terminate” from their real estate agent and an earnest money release.
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