Should Real Estate Brokers Get Involved With Due Diligence When Helping Their Clients Buy Property?
The old school approach that most brokers follow is that: "Don't get involved with due diligence when selling property. It will just expose you to possible litigation." That may have been the case many years ago, but it certainly is not the case now. In fact, just the opposite is true. Brokers are exposing themselves to potential litigation by not getting involved with helping their clients with due diligence.
Here are the facts:
• There is case precedence for brokers who were taken to court and lost because didn't get involved with helping their clients perform due diligence. Basically, the courts have ruled that if the broker is going to be compensated in the transaction they should be looking out for their client's best interest and and, at the very least, pointing them to experts or resources that can help uncover certain issues or problems.
• "Ignorance is not a defense." As a broker, you're better off being actively involved with the due diligence process to help your client investigate the investment opportunity.
• You can help to avoid potential litigation by offering your services to assist your client perform due diligence tasks. You will also be seen as a true ally and valuable team member.
Comments from opposing view points:
• Some investors insist that they don't want the broker involved with the due diligence when purchasing investment properties because it is not truly an unbiased opinion.
• Some brokers think that the amount of work involved is not necessary.
• Some brokers believe their clients don't really welcome their involvement with performing most due diligence.
There are some investors that don't want their broker involved with performing due diligence. That could be because their broker has not demonstrated to them that they are quite capable of helping them with it and do in fact have their best interests in mind.
This are many mutually beneficial points for allowing the broker to get involved with helping to perform due diligence. Also, the more brokers are involved and learn how to properly conduct due diligence the more value they add to the equation.
The world is changing rapidly to a more "value‐added" service orientation that clients continue to gravitate to. As brokers add this to their service arsenal, more clients will want to do business with them because they're realizing the benefits of having someone who knows what they're doing when conducting an investigation and due diligence on an investment opportunity. This offers the broker a unique selling proposition that the vast majority of other brokers are not offering clients.
As a broker, you want to find out sooner rather than later if there are issues that can't be resolved so you can move on to do other ones that are doable. As an investor, you want a broker on your side that can help you get through the due diligence process in an efficient manner, reducing the stress and additional workload.