The Due Diligence Check List is to synchronize all tasks in time for completing property inspections and investigations before signing the sales and purchase agreement.
Due Diligence Check List
Guidance for inspections & viewing property files
Due Diligence—Who does what and in which order?
After posting How to avoid buying a lemon I realized that due diligence (DD) is not for everyone a straight forward process. If you are undecided on where to start and in which order to progress, you are not alone. As long as you do your homework based on your prepared check list, I would not see a right or wrong order.
Because of limited time, resources and DD related costs I do the research when preparing the offer. At this time I do decide if location, property and value meet my buying rules. And after my offer has been accepted I do use the due diligence process to figure out whether the property is worth buying or not. That might include re-negotiating the purchase price if the DD reveals otherwise.
The reason for delaying the DD is simple; why would you spend time and money on something without knowing the vendor intends to go ahead or not? The order of my due diligence process is not fixed due to the fact that each project has its specific and so steps or services involved differ. Important is to view the property for identifying the risk and compiling the DD check list to avoid missing out on details.
Due Diligence Check List
It is always an exciting moment when the offer has been accepted. At this point the time starts ticking and lots of jobs have to be synchronized with different trades people. So let me summarize in no specific order:
You should have already obtained a mortgage approval from your bank, finalized your budget and prepared cash on hand for paying your team including for documents and services.
2) Council file and documents
· Council’s records and documents on file such as plans, permits and property related fees/levies such as council rates, encroachment fees, lease fees, etc if applicable
· Legal documents like Property Title, e.g. a Cross-Lease Title must have an attached Lease Agreement, a Unit Title comes with Body Corporate rules and entitlements, a Free Hold Title might include easements to share the land with neighbours (drive way) and council’s rights to dig up the land for sewer maintenance, etc.
3) Onsite Exterior Inspection
· Age, design and materials of the building
· House cladding, roof and structures (decks, piling, retaining)
· Driveway, gutter, drains
· Garage, car port, tool and garden shed
· State of maintenance and repair
· Signs of pest problems
· Built-in facilities (solar hot water, lift, automatic doors, etc)
4) Onsite Interior Inspection
· Design, standards and comfort
· Heating and cooling, ventilation systems
· Age and conditions of electrical wiring and fittings
· Plumbing, water taps, water pressure bathroom, kitchen and shower
· Built-in facilities, security, remote controls, wardrobes, cupboards
5) Connected Services
· Cable TV, SKY television, Internet
· Council’s services
· Water supply or own water tank
· Storm water connection or disposal soak pit.
Your check list will differ in complexity—it depends on the property type.
Who should be on your Due Diligence team?
· Bank, finance advisor or broker for loan structure
· Accountant for taxation issues, asset protection (ownership model like owned in own name, company or trust)
· Solicitor/Lawyer for reviewing your offer, title search, property conveyancing, money transactions
· Building inspector
· Trades people for quotations (repair, improvements, maintenance issues)
· House insurer
Apart from the title search by your lawyer you can order as much documents as you need to be satisfied such as LIM Report (Land Information Memorandum), Builder’s Report and all sort of reports (geological risk assessment, environmental protection, pollution, hazards).
So, ready to go?
Next page click here for Due diligence clauses
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