Due Diligence in Commercial Real Estate

The purpose of investigative due diligence

The overriding purpose of this form of due diligence is to allow the investigating party to find out everything that it needs to know about the subject of the due diligence. This then allows the investigator to consider his options in light of the facts:

	Withdrawal from the deal - if the due diligence unearths information that makes the investment, loan or participation risky or undesirable and which cannot be adequately resolved then
	Adjust the valuation of the investment - the investigator may revise his valuation of the company or reassess the price at which it will provide services. Usually the information will be adverse and therefore the valuation will go down or the price will go up, as positive information will have been made more publicly available by the target from the start.
	Have the problem remedied - it may be possible for a problem uncovered by the due diligence to be remedied before the deal goes ahead. For example, unpaid stamp duty could be paid, company filings could be put in order or, if negative information is uncovered on a principal of the target company, the investor may put pressure on the target firm to replace that individual. This will mean that the target is put into a state that the investigator is happier with before it deals with it.

Due diligence in real estate:

In US real estate law, due diligence may be a legal requirement. It is usually conducted by preparation of a Phase I Environmental Site Assessment on a real property holding, which is performed to determine potential environmental conditions that may cause harm to the surrounding environment.”

[For much more depth in this, or virtually any other topic in the universe, I highly recommend getting familiar with the Wikipedia.org site. What a powerful use of the Internet!]