08 Mar Why do you do due diligence?
As a lender, your clients depend on you for a smooth and seamless closing process. They also know that you will do your due diligence, even if they’re not quite sure what that means.
An easy way for you to explain due diligence is this: It’s simply your assessment of the borrower and his or her ability to repay you, and it’s your evaluation of any property used as collateral for the loan. Due diligence, of course, involves examination of any person or entity that promises to repay an obligation, of the property, the title to the property, the survey of the property, compliance with any laws involving the property and any leases affecting the property.
To drill down further, due diligence entails:
- Verifying ownership of the property
- Verifying the collateral is sufficient for the amount of the loan
- Evaluating risks of financing real property and to minimize risks
- Examining any risks regarding property jurisdiction for properties in foreclosure
- Verifying borrowers or guarantors are authorized to enter into the loan transaction
- Verifying loan documents are enforceable in relation to borrowers or guarantors
- Conducting an analysis of any potential liability that will adversely affect value, operation, or management of the mortgaged property
- Evaluating any ongoing litigation, judgments or liens against the property, borrower or guarantor
- Performing title searches of the real property including any easements and agreements affecting the title
- Surveying property and discovering any defects in the legal description
- Complying with any environmental or zoning laws
We know you want to keep the loan closing process seamless for your clients. We have been handling real estate closings for more than 75 years, and can answer any legal questions you have about due diligence or any other part of the process of buying or selling real estate. Contact us for a consultation. http://www.barsh-cohen.com/