This question is fair enough and asked often enough for us to blog about it. There are many different skilled professionals involved in a real estate transaction: you, the real estate sales professional, a lender and/or mortgage broker, a real estate lawyer and many more. You, however, are the first line of defense when it comes to the long list of due diligence measures that have to be taken to prevent mortgage fraud and ensure that good quality deals are taking place.
OREA defines due diligence as “the reasonable analysis or research that is done to check or verify material information about a property.” https://www.oreablog.com/2013/02/what-is-due-diligence/
Real estate sales professionals can and do choose how far they can go with due diligence, making it a time consuming and costly task on some deals. With all the tools and capabilities available, one could spend countless time and a significant amount of money performing due diligence – so is there in fact such a thing as too much due diligence?
One way to mitigate the time spent on due diligence is to evaluate what due diligence to perform and when you do it.
For example, common types of due diligence performed by real estate sales professionals include:
- Verifying who the legal homeowners are
- Obtaining a survey
- Validating the legal description of the property
- Reviewing the sales history on a particular property
- Checking for encumbrances like mortgages and liens and more…
Once you know what needs to be verified on every deal, your next step is to look at how you can get it verified. This is going to come down to the tools and technology you use to perform due diligence. Place a monetary value on your time and pursue tools that do as many of the due diligence items you need to perform, in one place – even in a single report. This will reduce the need to do 5-6 things separately, instead doing them all together.
Finally, when should you do it? We firmly believe at the application stage. Once a client has made the decision to engage you, due diligence should begin. Again, getting back to placing monetary value on your time – wasting time on deals that have issues is not good for you or any of your colleagues along the supplier chain. Not only do you stand to save time and expense, but you also stand to save credibility by performing due diligence at the point where a customer signs on.
There can never be too much due diligence when it comes to preventing real estate fraud. Generally speaking, if you establish a standard framework to perform due diligence within a set time and expense parameter, you should never find performing due diligence too time consuming and should be able to get through it with ease.
For more information about GeoWarehouse, a revolutionary tool that helps real estate sales professionals perform due diligence, please visit www.geowarehouse.ca