Real Estate 101: What Does Due Diligence Mean When You Purchase a Property?

December 6, 2022 | Indextapadmin

Real estate buyers and sellers might not be entirely aware of the duties required to thoroughly examine and appraise a property during the "due diligence period." Real estate deals often entail a due diligence stage, and those involved should understand the fundamental ideas if they don't want to delay dealing with the financial and legal repercussions. No worries: we have jotted down the real estate due diligence checklist to be followed and the reasons why it is important when purchasing a property.

Let’s understand why due diligence for new property is important with the example of buying top properties available in MMR.

What Does Due Diligence Mean in Real Estate?

Due diligence in real estate includes checking papers, making financial computations, and assessing risks. When real estate agents talk about "due diligence," they typically mean either the buyer's investigation before submitting an offer or the period of contingencies before the final closing.

Due Diligence Period in Real Estate

The due diligence phase of a real estate transaction normally begins after the Purchase and Sale Agreement (PSA) has been accepted by both the buyer and the seller and after any required contractual deposits have been paid. During this contingency period, the buyer gathers all the information of the property to help check out whether or not they will move forward with the transaction.

• Property documents and title status

A title deed, the highest level of land documents, represents full and complete ownership rights. The hierarchy of land documents spans from a notice of possession of land to a title deed.

In order to determine that the land documents have been legally issued, it is required to understand the level of the documentation hierarchy of the title as well as its historical context.

• Property details

This section includes information about the land's area, a miniature map, and a view of the area's surroundings.

• Chronology of ownership

This ought to confirm the ownership history of the property. Particularly if the original ownership document was a lower-level document rather than a title deed, you should confirm that the title deed was legitimately issued.

• Legal encumbrances and attachments

In order to be legally binding, any encumbrances imposed over land must be made in writing and recorded with the land office where the immovable property is situated.

• Litigation

Additionally, you ought to perform a litigation search to see if the owner is the subject of any litigation that might have an impact on the property.

•  Building control regulations and environmental regulations

In order to help you determine if the land can be used and constructed as intended, this section of the report will tell you about the most recent zoning, building control, and environmental restrictions that apply to land use and building development. It’ll confirm whether the construction or other necessary permits have been obtained for the buildings that have been built on the land.

• On-site survey

Finally, we advise conducting an on-site survey in collaboration with your property (legal) practitioner in order to observe the land location. But always be on safe side by ensuring if it is the same land you intend to buy and confirm that it is the same plot as shown in the land documents, in addition to the information previously mentioned to be included in your due diligence report.

In a nutshell, the above given is the quickest real estate due diligence checklist to be followed for the best properties to buy Mumbai or anywhere in India.