Due Diligence: What is important in the examination of real estate purchases?
Before any real estate purchase, it is essential to subject the property to a detailed (risk) examination. In technical jargon, this process is referred to as "due diligence" (DD for short). Literally translated, this means "due diligence". In Germany, we also refer to this process as "due diligence", but the term is more commonly used in international business transactions.
What exactly do we do? You can rely on us to accompany your real estate purchase with due diligence and to check all parameters relevant to you from a financial, legal and tax point of view before we let you sign a purchase agreement. The essential goal of due diligence is to evaluate your dream property and to exclude possible risks, and this includes liability risks that you would "buy" without careful examination. Part of the due diligence is, under consideration of the market knowledge, the analysis whether the purchase price is appropriate. If this examination shows that the purchase price of your dream property is not in proportion to the usual market prices, you have the opportunity here to conduct further negotiations together with us to determine the purchase price. If a due diligence would show that the risks are too high, this may well lead to the fact that we do not make a purchase recommendation for this property and you, of course, decide on your own responsibility whether you would like to purchase it anyway, or whether you want to withdraw from the purchase intention. The due diligence is therefore a factual determination of facts and in no way an assessment of your purchase decision.
Areas of Due Diligence in Red Sea Real Estate
The due diligence of a Red Sea property can be very extensive and is divided into different areas of analysis that can only be followed by companies that have dealt with these processes. Often the term is misused and it can be found in many Real Estate companies, even in Egypt. However, few know what the contents and exact analysis areas of a professional due diligence include.
Due to past copyright infringements by copying our texts, we refrain from describing these processes in detail at this point, as we fear that clients will be misled if this term is misused and clients will feel safe. However, we will be happy to provide you with further information by email if you are interested in purchasing one of our properties in the portfolio.
For investors in general, due diligence could be performed by external consultants. This is simply not possible in Egypt, therefore we have experts who help us to create a fundamental expertise for you. Upon request and for a fee, this can also be offered in full detail for private individuals, if a more detailed valuation is desired than is standard in our company. However, the so-called dicounted cash flow procedure is mostly irrelevant for private persons, because they often choose their property for personal reasons and have a personal connection to the property.
However, financial due diligence should be an indispensable basis for every purchase decision of an investor.
Legal Due Diligence on the Red Sea
Legal Due Diligence in Egypt
A very complex topic in Egypt. We experience it unfortunately again and again that buyers do things, which you would never accept or even do in Germany or Europe. Often because a real estate purchase at the Red Sea is linked with many emotions and longings. Unfortunately, this has already led to small but also big individual catastrophes and we see it as our duty to significantly reduce this risk. The legal aspects of a purchase and the analysis of all contracts and obligations are absolute duty for us! Even a change of contract can have far-reaching consequences in Egypt, which a buyer does not initially expect. This also applies to the tax due diligence. The DD requires a strict exclusion of possible, perhaps initially invisible, risks.
Technical Due Diligence
Also a very complex topic in Egypt, because it requires that at least information is obtained from the owner, in case construction defects or problems in the management of buildings are known. Unfortunately, here in Egypt there is hardly any legal awareness of these needs of prospective buyers, because the principle is "As seen, so bought". A clear case and often difficult for buyers to analyze and recognize the risks. Often prospective buyers are well informed about the price situation of the property, but they have no internal market knowledge. How should this be possible? We as a real estate company have our raison d'être exactly here. We offer an extended service for all buyers who want to be sure that their dream property will stand up to the technical due diligence and, if requested, not only provide a risk assessment after sighting. If the client is willing to make a manageable monetary effort, which is disproportionate to the loss and damage of the property and one, under certain circumstances, acquires a so-called "junk property", one can easily avoid high financial losses.
We will be happy to discuss with you in a personal meeting how exactly our Technical Due Diligence can be of benefit to you. This service can be used by any prospective buyer, even if the property is not purchased from us. Our goals are bigger than just your signature on a contract.
Environmental Due Diligence
Environmental protection is written in capital letters, especially in Europe. In Egypt, however, we hardly see anything of it. However, "things" are not yet moving on a large scale as we can observe in Germany, for example. Nevertheless, there are also opportunities for solar plants in Egypt and they are becoming more and more extensive. Environmental Due Diligence is about clarifying technical and (legal) environmental issues that also meet personal requirements, if the consumer so desires, and these are focused on the entire life cycle of a property, i.e. from planning and construction to use and eventual sale (and beyond).
As with technical due diligence, environmental due diligence involves an inspection of the property. The property is evaluated according to environmental criteria. Important aspects here include emissions and possible hazardous substances, water supply and disposal, building pollutants, any contaminated sites and the risk of environmental disasters, for example earthquakes or floods. In addition to the investigation of the property, geological investigations are also usually carried out. These are particularly important if there is a suspicion of contaminated sites. Here, too, we will be happy to advise you if you require an extended service.
Due diligence is an extremely complex and very important measure in the context of a real estate acquisition, in particular with large real estate projects and in Egypt even with smaller real estates and private purchases. It can be understood as a precise analysis of the strengths and weaknesses of the property, in which the potential risks are determined in addition to the value of a property. If the due diligence reveals deficiencies, the purchase price can be renegotiated and adjusted if both parties agree. If the deficiencies are too serious, this may even cause the (private) investor to completely refrain from buying and this is not always a loss if the risks are greater than can be seen at first glance. Especially in Egypt we ask all prospective buyers to carefully consider why not involve a reputable Real Estate company in the purchase of a property. The purchase of a property is often not a life decision. However, it can become life-determining if one makes a wrong purchase and is then often connected with high personal losses. We are always happy to advise you and look forward to guiding you through a safe real estate purchase.