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Due Diligence In Real Estate: Important Tips For Smart Investors

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What Is Due Diligence In Real Estate?

due diligence in real estate in nigeria

Doing your research before purchasing real estate is essentially what is meant by due diligence.

If you intend to purchase any immovable property in Nigeria, you must first perform due diligence to confirm that the seller is the rightful owner and has the authority to sell the property to you.

You should also look into any potential legal encumbrances or attachments.

 There are a number of due diligence tasks to complete in order to reduce risk and potential costs upon acquisition, regardless of whether you are looking at a land, duplex, terrace, bungalow or multi-unit rental property.

Before purchasing a new car, some consumers conduct thorough study. They research online, go to the manufacturer’s website, , talk to other users directly, etc.

Therefore, it is shocking that some people in Nigeria continue to purchase land without first seeking the advice of a real estate lawyer experienced in real estate transactions.

 Before starting the process of buying a property, it is highly important to consult a qualified real estate solicitor, to help you determine if the property is genuine or not.

You also need the assistance of qualified surveyor with thorough knowledge of land issues.

 It is recommended that you obtain copies of the property’s survey plan, and other title documents from the person who wants to sell the property to you.

 Then give the copies to your solicitor, surveyor, or other professional, who will use them to conduct a property search at the land registry.

You don’t need a soothsayer to warn you that something is wrong, if a potential property seller refuses to give you photocopies of the property’s documentation so you can investigate them before making a payment.

If you’re an investor, follow these steps. Before entering into a contract for a potential property, you must have a procedure in place and an organized strategy to navigate each phase.

Due Diligence By Your Solicitor

due diligence in real estate investment

Based on the title documents that the vendor has provided, your solicitor will go ahead and perform a search at the land registry

A land registry is where records of title of real estate assets are kept.

The documents may include a deed of assignment, a legal mortgage, deed of gift, a will, assent, a certificate of occupancy, a deed of assignment, a lease agreement, a power of attorney, a declaration of trust, a survey plan, a certified true copy of a court judgment, a vesting order, etc, depending on the nature of the vendor’s title.

The Solicitor’s Investigation Findings

The state of the land and any liens or other issues connected to it will be revealed by your solicitor’s research.

 A typical title search will show who the real land owner(s) is (are) and whether the property description matches the vendor’s description.

Whether there is a break in the chain of property devolution.

Whether the land is in dispute

Whether any portions of the land has been sold to a third party, or whether the government purchased the land in the interest of the public at large.

Whether the previous owners of the land put any legal or customary restrictions.

 Whether there are issues with the surrounding owners or the previous owners; if there are any existing restrictive covenants imposed on the area where the land is located, such as UCCDA, FCDA, or LASPPPA

 If there is an easement on the land and whether your intended renovations or projects will violate them. Whether there is a caveat on the property. Whether the land is being litigated in court.

Whether the court order transferring title to the vendor has been appealed against. Whether it is being investigated by security agencies; whether it has been confiscated by the government; etc.

Visit The Property

due dilligence in real estate

In real estate, a property can have hidden defects, which may not be discovered until after sale has been finalized.

By looking into the condition of the home/land yourself, you can avoid purchasing a defective property.

When the seller explains the state of the residence, do not just take what they say at face value. Go into the house personally and take a look around.

Verify that everything is as the vendor has described it, by walking the property.

The physical inspection of the land will reveal

  • The terrain of the land
  • Accessibility
  • A clear grasp of the location
  • Boundary confirmation
  • Coordinates collection
  • Environmental state etc.

Measuring The Land

Before registering the land in their name, buyers are urged to measure the property. The purchaser should enlist the aid of a reputable surveyor to guarantee that the dimensions of the property and its borders are precise.

On-site survey

Finally, I highly recommend you engage the services of a qualified surveyor, to conduct an on-site survey on the land, to confirm that it matches the same plot as shown in the survey plan.

In other words, if you want to purchase a property, whether it is through a family or a real estate agency, it is very important that your surveyor obtains the coordinates of the property. He will use the coordinates to conduct a search.

One error that most investors make and one that has caused many to suffer, is to depend solely on the coordinates that the family or real estate company provides.

On your behalf, the surveyor can now head to the state registration for confirmation after gathering the coordinates.

This will show if the property in question is a Government committed property or free from acquisition.

Purchasing land that is under government committed acquisition is equivalent to flushing your money down the drain, because such properties have been planned for overriding public interest, such as schools, road networks, hospitals, drainages, parks, etc.

The state registry search is very important, and it is carried out with coordinates and survey.

Conclusion

While real estate investment brokerage firms, like Deka Real Estate, make every effort and follow tried-and-true procedures to investigate, screen, review, and comprehend the properties of each of their “Real Estate company partners ”  it is always advised that investors conduct their own due diligence before making a purchase.

Although the process of due diligence can be quite intensive, protecting your investment is well worth the effort. You have a right to know every pertinent detail about a property as a prospective buyer before making a purchase.

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