What Should I Expect During Due Diligence?

Florida Management Consultant | Sarasota County Business for Sale

Now that you have signed a contract to purchase a business, you enter the due diligence phase. This is a negotiated term of typically 14 to 30 days during which the buyer arranges to perform needed inspections, review titles and deeds, negotiate repairs, and even decide if you want to continue with the purchase depending on issues found during the process.

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The first thing a buyer should do is arrange for inspections. Depending on the property, this might include inspections of the building, electrical, plumbing, heating and air conditioning, fire suppression systems, commercial kitchen equipment, and so forth. If issues are found, the buyer and seller must agree on how repairs are made prior to final closing. Other inspections include termites, septic systems, and other inspections depending on the type of building used by the business. Inspections are normally paid for by the buyer unless negotiated differently.

Other events that should occur during the due diligence phase include:

  • Getting an appraisal done if you are financing the purchase. The lender will probably insist on this so the buyer won’t need to initiate this action.
  • Arrange for property and/or business insurance.
  • Arrange for a property survey. This is important because any encroachments by neighboring property owners needs to be determined sooner rather than later. Some finance companies won’t complete the sale if encroachments are found.
  • Arrange for owner’s title insurance. This protects the buyer if any title issues are found.
  • Check HOA restrictions and covenants. This is critical if you are buying a rental property with an HOA in place.
  • Review any other issues that can arise during the sales process.

Buying a business can be a stressful time for buyer and sellers. Knowing in advance what will happen between signing a contract and closing the sale can reduce this stress. Also, using a professional business broker like Hallmark Business Brokers will greatly reduce your stress by having a professional organization to help you through the process. Contact Hallmark Business Brokers today if you are ready to buy or sell a business in the greater Sarasota area.