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WHAT IS THE DUE DILIGENCE IN REAL ESTATE?

Monday, August 28, 2023, By Julio Velázquez, Lawyer in SILMÉXICO

When we think about buying or selling a property, we generally focus on some elements such as the price, delivery date, date of signing of deeds, etc. For this reason, we omit to analyze the background of the process that will result in a successful operation, such as the passage of due diligence or due diligence, however, what do we mean when we talk about this topic in the world of Real Estate? 

The process of buying and selling properties is made up of various stages, one of them, and perhaps the crucial and important stage is due diligence, in which the property information must be analyzed to provide suitable legal certainty for the celebration of said operation.

Therefore, a legal team of specialists in real estate consulting must objectively and in detail analyze all the documents that make up the transaction file, this analysis must result in a favorable opinion to later give the green light, this in order to provide security and legal certainty to the purchaser or seller of the property.

TIME OF THE DUE DILIGENCE

Once the initial document is signed, the due diligence time varies; everything will depend on the negotiation of the parties or the conditions in which the operation is carried out, although the final opinion must be given by the expert adviser who is studying the operation, since, due to his/ her experience, he/ she will be able to assess the time that is performed documentation inspection thoroughly. 

 

Normally an average term is from 10 to 30 business days, in the most delicate operations; either because a large amount of resources is handled or due to a condition that greatly compromises the same parties involved, the due diligence period could exceed the time contemplated; This is so that, in case it is required, process or obtain a missing document or an indication that conditions between the parties have the window of time.

ELEMENTS TO VERIFY IN THE DUE DILIGENCE

Once we have identified the average terms of analysis and study, it is time to know what are the elements that are studied in this due diligence.

In each operation, the parties must have a checklist on which they rely to request information on the property, the owner, and the legal status, among others. Normally the most important elements are made up of:

 

  • Public deed.
  • Registration of the deed before the RPP (Public Property Registry).
  • Identity and quality of the seller, which is detailed in the public deed or power of attorney (as well as the corresponding record of power).
  • Compliance with tax obligations, that is, payment of taxes.
  • The property has basic services, such as electricity and water.

 However, these points and the checklist will depend on each operation, since they are all different.

 At SILMÉXICO there is a strong and consolidated legal team of specialists in real estate consulting that will be able to help review each of your operations in detail, making you feel comfortable and legally secure.

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