Why a seller should prepare & pay for buyer’s due diligence

Managing Partner and Senior Sales Associate , ICR Commercial Real Estate
  • Oct. 15, 2014

Barry StuartI will preface my comments here by saying it is important the seller is serious about selling his property before considering this advice.

In an earlier post the question was addressed: Should a seller pay for a Phase I Environmental. It was recommended the vendor contract an environmental engineer and begin the process before the property is placed on the market. That’s a good lead-in to this article.

Areas of due diligence focus in a sale

Aside from environmental and financial matters, we find the typical areas a prospective purchaser will focus on when buying Saskatchewan commercial real estate are structural, roof, heating/cooling systems, elevator (if applicable) and site survey.

The buyer’s financial institution often requires written reports for some, or all of these areas. It is important to engage professional contractors who are specialists in each of these specific areas.

Should a seller spend the money?

Who is the buyer going to engage for these reports? Are they reputable, experienced contractors who are not going to overstate some area of deferred maintenance for self-serving reasons?

It is highly probable that if their report indicates there needs to be significant money spent to correct a problem, the buyer will try to renegotiate the price accordingly. At this point the buyer is not likely to be open to a second opinion from another contractor.

Solution- or problem-focused contractor

I would generalize and say we often find contractors view problems they may encounter with either solution- or problem-focused vision.

As a seller, I would rather control the process, pay for the reports and know they are written in a fair manner with cost-effective repair or replacement solutions where required. It is less likely unknown cost issues affecting the sale price will arise after the deal has been negotiated.

How your commercial real estate broker can assist

An experienced broker is likely to have dealt many times with issues within each one of these property components. He will know the best contractors to engage to inspect and prepare the reports.

Consider investing the time and money before taking your property to market. We have many examples that demonstrate you will achieve a quicker sale and more money with the least amount of hassle.

ICR is Saskatchewan’s largest privately owned real estate company with offices in Saskatoon and Regina; as well the company services Saskatchewan’s secondary markets. ICR specializes in the sales and leasing of commercial property and is known for its expertise in commercial development and re-purposing of existing buildings.

To discuss this or any other commercial real estate topic, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.

Born in small town Saskatchewan, I began my real estate career in Saskatoon at a really early age in 1978. Although I can’t claim to be No 1 in North…

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Born in small town Saskatchewan, I began my real estate career in Saskatoon at a really early age in 1978. Although I can’t claim to be No 1 in North…

Read more

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