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Due Diligence for Buying Property: A Step-by-Step Guide to a Risk-Free Investment

Fri, Oct. 06, 2017 Posted: 09:00 AM


Buying a house is probably the biggest financial investment that the majority of us will make. With such a costly transaction comes a greater amount of risk - you could potentially be putting your life savings or future credit on the line. In order to protect yourself from any negative impact, it's vital to treat the purchase as a business transaction, and it all starts with due diligence.

Unsure where to start? Follow this step-by-step guide from Global Database to ensure you have all the information you need before signing on the dotted line.

Step 1: Market Research

Before you even begin looking at specific properties, you'll first need to gain a good understanding of how the market sits in your preferred location. Property websites like Zillow and Hoopla can help you determine the average house prices in the area, along with working with a real estate agent and looking at industry blogs and local sites.

You may also want to take a look at crime statistics for your chosen area, as well as nearby school rankings.

Step 2: Visit More Than Once

Visiting a house once isn't enough to do a thorough check and also to see what the area is really like. Instead, try and visit two or three times, at different times of the day and week. If you're particularly unfamiliar with the location you might even want to try staying at a hotel or Airbnb in order to really see if you like the area.

When you're viewing the property, it's a very good idea to make a list of all the points you want to check. This should include things like looking for signs of damp or cracks in ceilings, checking the plumbing, counting power outlets, and making sure light switches and other electrical wiring is all fully functional.

Step 3: Search Online Records

Carry out a search for the title of the property - this will not only tell you who legally owns the house, it will also give details about its boundaries, liens, and more. You might also want to search for land surveys that have been made on the property, if there are any. This will provide further legal info about the property and its land, including structures built on it and physical factors.

Step 4: Hire a Surveyor/Building Inspector

A frightening number of buyers still go ahead with a property purchase without having it inspected by a professional. These checks will give you a solid overview of the building's structure and its condition, as well as ensuring there are no building codes and regulations being broken.

Without allowing a professional to give it a thorough once over before buying, you could encounter potentially costly changes that need to be made, and could even be putting you and your family's safety at risk, so it definitely makes sense in the long run to pay out for a professional.

Step 5: Get an Appraisal

If you're financing the property purchase through a mortgage or other loan, you'll usually need to hire an appraiser. Even if you're not, it's still a good idea to get one; it makes much better business sense to seek an estimate from a qualified independent professional as opposed to simply relying on the asking price as a benchmark before you put an offer in.

Step 6: Use a Solicitor

It may seem like an unnecessary expense, but getting a reputable solicitor on your side can take a lot of the stress out of the whole buying experience, particularly if you're a first time buyer. Obviously, the best option probably isn't going to be the cheapest, so it makes sense to do your research in order to find the best professional you can afford.

Recommendations from people you trust can be useful, or alternatively a business directory can be a good place to start. Global Database for example, offers users a number of filter options such as location, industry, job title, and more, so you can easily narrow your search to the right kinds of professionals.

Step 7: Sort Out Insurance

Home insurance should be bought before the exchange takes place - leaving it until the very last moment will just cause you unnecessary stress and that's when mistakes get made. You may also wish to buy title insurance, if it's available for the property. This will give you an added layer of protection from a range of possible problems, such as unpaid back taxes, claims by heirs and fraud.

Step 8: Get Finance in Place

If you need to take out a mortgage to buy the property, this should be sorted out as soon as possible. It can take much longer than expected to get this in place, especially given that you may need to do some work on your credit score(s) before you can apply.

Make sure you approach this in the same way you have throughout the due diligence process, and research each lender thoroughly before committing to one. There are a wide range of different products on the market, so make sure you spend some time doing all the sums in order to find one that offers you the best rates (without being too good to be true, of course!). A search using a company intelligence platform can help you find lenders in your location.

While carrying out all of these checks and doing all of this research might seem excessive, it's 100% worth it in order to ensure that your investment is as protected as it can be. Without having all of this information at hand it will be very difficult to make an informed and risk-free decision about a property, and ultimately leaves you open to expensive problems that will need to be addressed after you've moved in. As the old adage says, it's better to be safe than sorry!

To find property professionals or lenders in your location visit us at www.GlobalDatabase.com

Lynn Joesph