Due Diligence is a designated time period in which the potential buyer/investor is granted in order to evaluate the merits of the acquisition and to make a decision on whether or not to go forward with the purchase.  When a real estate purchase, or investment, “goes south”, the buyer/investor will typically blame someone else; namely the agent/broker or the managing partner; and thus allege, that the due diligence that they conducted for them prior to close of escrow was insufficient or flawed. However, keep in mind that said buyers/investors have a "duty of independent inquiry" that they are obligated to exercise; i.e., "there are no Easter Bunnies". The filing of a lawsuit, with damage claims, typically results.

 

The detailed evaluation by a real estate expert of the quality of the due diligence investigation conducted by the buyer and investor, in accordance with Industry standards, is often at the heart of many of these cases.

 

(1.) An example of a buyer’s due diligence items that should be investigated concerning the purchase of a personal residence are: Title Report, seller’s disclosures, home inspection, building permits issued, termite inspection, soil conditions, environmental hazards, mold, easements and encroachments, school districts, Megan Act, HOA/CC&R’s, water intrusion, to name a few.

 

(2.) An example of the due diligence items that should be investigated for an investment property are: the exceptions to Title Report, the conditions of the soils, Tentative Map Conditions of Approval, the development timetable, the projects economics, entitlements confirmed, all environmental issues, the feasibility of permits being issued and the assumptions upon which the pro forma is based, etc.

 

Mr. Ryan has served on several cases in which at least one of the case issues centered around the adequacy of the due diligence investigation that the buyer/investor performed in which they should have discovered certain items that later resulted in negative financial impacts.  Serving as a real estate expert witness, Mr. Ryan has conducted well over 50 due diligence investigations during his 45-year career in the Industry, and again, has been called upon to testify in court on this subject on several occasions.