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Due Diligence: Critical to Obtaining Self-Storage Financing

Stephen I. Grossman Comments
Continued from page 1

Confirmation Checklist

As with any real estate transaction, unnecessary holdups or information gaps cause deals to be delayed or cancelled. The potential buyer needs to be provided with all due diligence information promptly and within the prescribed time frame documented in the purchase agreement. This will ensure the property will not remain off-market for an extended period of time in the event the buyer decides not to proceed with the transaction.

Provide the buyer with a detailed checklist of documents that were provided with a short description of each item and the source of the information (i.e., public records, tax assessor, court, etc.). Also include contact information, e-mail addresses, phone numbers, etc.

In the event a document is not included, provide an explanation as to why it was omitted. This procedure should prevent unnecessary delays during the buyers due diligence review period. Remember, any inaccuracies in the information provided to the buyer will cast doubt on the transaction and may lead to greater uncertainties, which may equate to increased perceived risk, possibly leading to a lower selling price or cancellation of the transaction.

A prudent and experienced buyer will look for omissions or the lack of accurate information. Inaccurate or incomplete disclosures predictably result in the buyer spending more time fully evaluating the property. This could also exert downward pressure on the property value as well as delay a timely closing.

It is always a sensible and practical policy for the seller to disclose all aspects of the property. Not doing so could lead to post-closing issues including but not limited to potential legal action.

Building Inspection

Carefully walk the exterior of the building and note any unusual items in need of repair. If any construction deficiencies are detected, contact a professional who specializes in potential construction defects. Any questionable construction that may not meet current building codes needs to be addressed with the seller and, if necessary, corrected.

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