Due diligence is a crucial period during a commercial real estate transaction. This period is a time when the buyer conducts important inspections and reviews of numerous aspects of a prospective purchase to get a better idea of the condition of the property. This due diligence period can move along relatively quickly or it can take a few months for all inspections to be conducted, but how do you know how long your due diligence period should be? In today’s blog, we take a closer look at the due diligence process in Minnesota commercial real estate.
How Long Is Due Diligence?
Due diligence is an established period that can be entered before or after the two sides reach a deal, but if it is before a deal is made, the prospective buyer may need to sign a non-disclosure or confidentiality agreement. In order to ensure you don’t encounter any unexpected surprises with your new property, you will need to keep busy during the due diligence period and make sure all the necessary inspections take place during this timeline. If you don’t conduct the inspections, you may be on the hook for any surprises that were not uncovered during this period.
So how long should the due diligence period be? Well, it really depends on a few different factors related to the property and the interests of both the buyer and the seller. If you’re selling a relatively small plot of undeveloped land that you own outright, you may be able to conduct due diligence in a pretty short period. Conversely, if you’re selling a bigger industrial space that requires a larger environmental impact survey and government permits, the buyer may want more time to conduct all the necessary inspections.
Your purchase agreement will lay out what is expected to take place during the due diligence period, and it will also cover some of the responsibilities for the buyer and seller. For example, the purchase agreement will lay out, among other things:
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Which due diligence activities will or may be performed
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Whether the buyer or the seller is responsible for their completion
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Whether the buyer or seller is responsible for their cost
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A plan for addressing any uncovered issues
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Next steps if either side is not satisfied with the findings
If you want to speed up the due diligence process and have confidence that the period will be conducted correctly, be ready to bring professionals into the mix. Aside from a commercial real estate agent, a firm like Commercial Partners can handle different aspects within the due diligence period to help ensure everything looks good with your prospective purchase. Let us help keep your latest commercial real estate purchase on track.
For more information about the due diligence period, or for help with a different aspect of a commercial acquisition, reach out to the team at Commercial Partners today at (612) 337-2470.