REAL ESTATE DEVELOPERS AND BUILDERS
Due diligence is a legal term for actions taken by real estate developers and builders prior to land purchase to avoid liability. It generally includes market scale and growth, consumer characteristics, competitor characteristics, and development constraints (physical, legal, and political). These elements serve as a basis for revenue projection followed by a financial pro forma (plan of annual revenues and expenses). Completion of all the analysis steps will provide you with every requirement for a due diligence report if requested by an investor or lender.
According to planner David Jensen,
“A thorough understanding of regulatory, contextual and market forces which impact a particular site is vital to successful development . . . Purchasing raw land without doing adequate research can doom the project before it starts.”
Builders requiring only a few lots at a single location may assume the land developer to be responsible for such due diligence, an assumption often leading to unnecessary problems. Make no assumptions about necessary research on your site selection decisions, regardless of scale. Make sure it is completed to your satisfaction according to the evaluation guidelines set forth by the Parker Associates team. Let us know how we can assist you.