Navigating the process of selling a property can be overwhelming, especially with the various levels of inspections required based on the buyer’s due diligence and the type of financing used. For instance, if the buyer is using CMHC financing, the inspection requirements will be more stringent. Additionally, the condition of the building and any necessary repairs will influence the due diligence period.
Understanding the mandatory documents and potential physical inspections can be daunting, but referring to the Master List of Due Diligence items can be incredibly helpful. This list is comprehensive, and not every item will apply to every sale or buyer. By reviewing it, you can identify which items are relevant to your specific situation, helping you feel more prepared and less overwhelmed.
Key documents to consider include the rent roll, surveys, tax records, zoning information, appraisals, mortgage statements, insurance policies, environmental studies (if applicable), and income and expense reports. These documents provide a clear picture of the property’s status and help ensure a smooth transaction.
The inspection process during the due diligence period can sometimes feel intrusive and never-ending, especially if new issues are discovered along the way. I’ve seen inspections extend for up to a year in some cases. It can be challenging to meet everyone’s expectations, but involving property management and tenants early on can foster cooperation and make the process smoother. Most transactions proceed without major issues, and with strict adherence to timelines and professional management, the closing process can be efficient.
A realistic timeline for completing a sale includes a 30-day period for completing the due diligence checklist, followed by an additional 30 days for lawyers and lending institutions to fulfill their obligations. Excluding a 60-day marketing period, the entire sale process can be completed within this timeframe. Achieving this requires a high level of cooperation, preparation, organization, and expertise, but it is certainly possible. Remember, you’re not alone in this process—lean on the professionals around you, and trust that with the right approach, everything will fall into place’
The following is a quick review of potential due diligence items:
- Pictures
- Agreement of Purchase & Sale
- Rent Roll
- Tenant Rental Status Report
- Survey
- Taxes (Interim or Final)
- MPAC Statement Showing Individual School Tax Paid Per Unit
- Zoning and Permitted Uses
- Appraisal
- Mortgage Statement(s)
- Insurance Policy
- Insurance Quote
- Phase One Quote
- Management Contract
- Superintendent Contract
- Gas Bills
- Hydro Bills
- Water & Sewer Bills
- Other Utility Bills (Telephone, Cable TV, etc.)
- Elevator Contracts
- Capital Item Improvement Leases
- Additional Revenue Contracts
- Floor Plans or Unit Square Footage
- Pest Control
- Snow Removal
- Land Maintenance & Repairs
- List of Chattels Included in Sale
- Fire Retro Fit Letter
- Fire Safety Plan
- Annual Fire Inspection Certificate
- Blueprints of Buildings
- Capital Item Repairs/Improvements
- Environmental Phase I
- Environmental Phase II
- Environmental Phase III Hazmat Removal
- Engineers Structural Report
- Asbestos Report
- Tenant Rental Leases & Rental Applications
- Commercial Lease(s) if Any.