How to do real estate due diligence to simplify the sales process

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How many times during your career as a real estate agent, be it long or short, have you found yourself dealing with an uncomfortable question from a client?

Being caught unprepared in front of a buyer’s requests, especially in relation to information on the property, is definitely not a good thing.

You know very well that this situation can generate negative feelings in the client and undermine the hard-won trust, despite your excellent reputation and doing your best job up to that point.

The reason lies in the fact that anticipating the needs and preventing any doubts of a customer is essential, not only to conclude the negotiation positively but also to be able to sell a house quickly.

Knowing in advance the potential and criticalities of the property to be sold represents an opportunity not to be underestimated.

In a nutshell, it can be quite a problem for both you and your client not to know the risks of the transaction first.

Real estate due diligence is the tool that every agent should use to develop an appropriate and winning sales strategy based on the characteristics of the proposed property.

In fact, it is based on in-depth knowledge of the strengths and weaknesses of the house, so as to avoid any complication in the sales process. Real estate valuation guarantees greater protection for you and for the buyer.

The purchase is more serene, “unwelcome surprises” are avoided and you can offer a service at the highest level of professionalism.

Do not forget that among the qualities of a real estate agent there must absolutely be a continuous improvement of skills and the use of increasingly efficient and functional methodologies for your purpose, or to sell properties. But with the rise of sales in kingdom islamabad is has shown to be a very remarkable place to invest in.

Why is real estate due diligence increasingly used?

Proceeding with a complete check-up of a property before the sale is now a widespread practice in the real estate sector.

In essence, having a detailed picture guarantees greater peace of mind, starting with you so that you can manage the sales procedure with less stress. You will also have the situation completely under control and above all, you will have the time necessary to identify and resolve any threats in the transaction.

Remember that there are services that the agent must obligatorily provide to the customer, among which there is adequate information on the property you are about to sell (provenance, town-planning-building regularity, cadastral situation, etc.).

Real estate due diligence (literally translated from English means “ due diligence ”) therefore allows you to investigate in a technical way several aspects of a property in order to establish the conditions, the main characteristics and have all the useful information available.

With this procedure, you can identify the potentially critical points of the property, connected to the state of health and legal situation, so as to reduce the management of the contractual risk.

So it is clear why, if until a few years ago this real estate practice was used almost exclusively for the management of high-value properties, today it is increasingly chosen even by small buyers.

Making the evaluation of what you are about to buy before the act of purchase makes the customer feel more protected.

It must also be considered that the investigation of a property can help to define possible actions aimed at tax savings, something certainly not underestimated by those who buy.

Sales negotiations are faster

Among the main advantages of the preliminary verification of the buildings to be sold is the saving of time and of any problems before and after the deed.

The danger of compromising the sales process is reduced to a minimum due to unforeseen events that may arise, in the worst case, just when the draft of the preliminary sales contract is drawn up.

Knowing the irregularities, you have the possibility to make the necessary corrections before the drafting of the contract.

Sales negotiations are streamlined and speeded up, optimizing your work and obviously the results you can achieve.

The customer is facilitated in the purchase

Surely you know well that the buyer who has decided to buy a property has come to the end of a long process of searching for the property that best suits his needs, made up of offers, deep reflections, economic evaluations, and a mortgage request.

The last thing your customer wants is to have doubts/problems about what they have chosen.

When with the real estate due diligence it is possible to draw up a clear and complete report on everything that characterizes a house, the customer will feel relieved, will have no reason to hesitate and the sale will proceed without any hitch.

Ultimately, you will have less need to use your best mediator skills to manage conflicts with clients.

National and international standards for the valuation of a property

In Italy, until a few years ago there was no legislative reference or rule that established the criteria by which a property valuation should be carried out.

Our country today has aligned itself with international standards for property valuation.

It is an important action that has allowed Italy not only to acquire updated information on the national real estate situation but to facilitate the work of all those involved in real estate transactions.

The Real Estate Valuation Code

The methodologies used to evaluate a property have been governed by a series of rules, especially at the European level.

The Property Valuation Code (Italian Property Valuation Standard) is the result of the implementation of such actions. It is an operational tool developed by the Technical Scientific Committee of Tecnoborsa and intended for all subjects engaged in 360 ° real estate valuation activities, therefore it represents an important reference for you too.

The Code consists of a first part that clarifies the fundamental concepts belonging to the property valuation activity. It is to be considered as a glossary divided into 3 sections:

I. Consistency measures (reference standards and conventions

II. Estimation values

III. Evaluation procedures

The second part is dedicated to the definition of the procedures to be adopted in the practical verification of the property.

Let’s see in detail how real estate due diligence is carried out

The investigation activity on a real estate property consists of various actions to be carried out and data to be cross-referenced.

You can imagine the procedure similar to that of a puzzle to be composed, where each piece represents information of the property which, combined with the others, returns a complete analysis.

Certainly, it is not a process that ends in a short time, but by facing it in the right ways and at the right time, it is possible to obtain a correct and functional evaluation for your purpose.

In fact, the data to be collected are many and not always easy to find, if we also take into account the appropriate checks to be carried out.

Types of information necessary for the evaluation of the property

Even if the real estate valuation constitutes a single document that comprehensively contains all the information relating to a property, it is actually composed of data from multiple sources, which offer information on different aspects.

For example, the economic evaluation of the property is essential for a real estate agent like you, because it allows you to understand the value of the product you have in your hands and consequently how to treat it. It is established on the basis of current use, the location area and the trend of its reference market.

The other main areas of investigation are:

  • Cadastral (legal-administrative due diligence)
  • Technical-structural (technical due diligence)
  • Security (security due diligence)

The cadastral verification serves when you have to sell/buy a property, to ensure its regularity. Then we proceed with the analysis of the surveys, the cadastral plans to check that what is represented corresponds to the real state of the property. Furthermore, the accuracy of other basic information is verified, such as the address, the floor of the apartment and the interior.

Closely linked to this phase of the investigation, for the realization of a real estate due diligence, is the legal-administrative part, that is the verification of the ownership of the property if there are constraints, registration of mortgages, etc … In the same way, it is ascertained the compliance of the buildings with the building-town planning regulations in force.

The technical and safety evaluation of the house are the next two steps of absolute importance.

Who would want to buy a house that is dangerous to live in?

A qualified professional (surveyor, architect or engineer) must make sure, by carrying out an inspection, that the static conditions of the apartment comply and whether or not they correspond to what is reported in the documents of the property.

All the systems present in the building (electrical, plumbing, etc.) are also subjected to technical investigation. These, in fact, must comply with the compliance required by law.

The verification of the safety of the property, on the other hand, consists of a series of analyzes to evaluate factors related to the seismic risk, for example, the environmental impact or the risk of fire.

In particular, the environmental impact and the seismic risk in Italy are issues at the center of the collective interest, therefore those who are preparing to buy a house are particularly interested in verifying these factors as well.

How to find and integrate the documentation on the property

Properly carried out real estate due diligence is carried out with an examination on two different levels:

  • Documentary
  • Investigation of the real (technical inspections)

In the document evaluation, as you can easily guess, we proceed with the retrieval and analysis of all the existing documentation of the property. This allows to have some first and fundamental information and to understand where it is necessary to proceed with clarifications and/or investigate further.

This first study step is followed by the second one, which is the one used to verify how much of the information contained in the written documentation corresponds to the real conditions of the property. Then we proceed with inspections and technical assessments.

If inconsistencies are found in the investigation activities carried out, documents and inspections, it is necessary to communicate the irregularities to the competent bodies, thus requesting the necessary additions and corrective actions.

Who should prepare the evaluation report

Certainly, there is no need for us to tell you, that the figure of the real estate agent is extremely complex, as it must be multidisciplinary to be able to better manage his work.

A good professional in the sector knows how to move easily between legal, technical and administrative issues.

Despite this, however, know that your skills are not sufficient to independently manage the entire property valuation process.

There are specialized professionals qualified to carry out the real estate survey (architects, engineers, experts, etc.).

The skills that these figures must implement, also based on the actions that require the verification of a property, can be summarized as follows:

1) Evaluate the general state of the assets from a cadastral, structural and safety point of view based on the compliance required by current regulations

2) Interpret and cross-reference the collected data with a comparison between the existing documentation and the visual assessment resulting from specific technical inspections

3) Detect any critical issues of the property

4) Provide for the management and resolution of irregularities found

5) Elaborate the detailed verification report of the property in the manner provided

Therefore, the complexity of the skills that a real estate appraiser must possess, as well as the need that the sector has for specialized figures in this sense, is also evidenced by the dissemination of specific training courses to achieve professional certification.

How to prepare the final real estate appraisal report

The phase of drafting the final evaluation document on the state of the property by the professional in charge involves the creation of a document divided into various parts, each of which refers to a specific aspect of the property.

The report must indicate the actual existence, validity, presence or absence of constraints and/or limiting factors of the property under investigationA list of all the documentation found must be drawn up, specifying the methods of acquisition (public offices or from third parties). Another list, on the other hand, must indicate the documentation produced by the party.

The report must also indicate the date on which the inspection of the property was carried out.

Whoever draws up a state-of-the-art and truly complete real estate due diligence must also express his motivated judgment, based on the comparison made between the documentation examined and the inspection carried out.

It is always up to the professional, in charge of preparing the evaluation report, to quantify the costs and charges necessary for resolving any non-conformity of the property analyzed and to draw up a final summary.

Thanks to the real estate due diligence, you play in advance

Real estate valuation is a reality, you can’t wait any longer.

The continuous updating and higher quality of the services offered to buyers are in fact the trump card for being able to sell.

The real estate market is constantly evolving and is more demanding than in the past.

Not using a risk assessment tool means contributing to damage to your real estate agency, offering an inferior performance to the competition, and managing more problems and unforeseen events in sales negotiations.

Playing in advance allows you to ensure your business a decidedly rosy future with a worthwhile investment, which you will be able to savor in the short term, while in the long run, you will get the best results.

Get informed and contact those who can help you understand more on the subject. If you want, then, to move from theory to practice, rely on professionals specialized in real estate valuations.

It is essential to choose people with whom you can build a strong collaborative relationship over time that can help make the gears of your real estate agency work at full capacity.

The technical skills of the professionals you choose to work with, combined with your experience in the field, can open up new prospects for growth.

You will be able to guarantee the possibility of evaluating in first person the convenience or otherwise of acquiring a property to be marketed. Real estate due diligence is not just a tool for your business, but it represents a new sales strategy, an excellent risk-proof practice.

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