Due Diligence - "Knowing is Half the Battle"
G.I. Joe cartoons had it right when they said "knowing is half the battle" which guides our day to day practice. This will be the first in a multi-part series on due diligence.The goal is to provide you with resources at your disposal, most of which are free by the way, which can help you conduct research. This article will provide an overview of websites I consistently use to research when working on a transaction. Subsequent posts will dive a little deeper into these sites and how to interpret the information you will encounter.
Typically, the "due diligence" parties engage in is looking at the actual asset (property) that is the subject of the transaction. It's just as important to conduct due diligence on the parties involved, buyer, seller, realtor, mortgage broker, etc. who are working on the deal. No matter the size of the deal, I take time to conduct this research. You want to understand the parties, their history in real estate, and any other details which will help. Usually five (5) to ten (10) minutes can uncover very valuable information.
Whether you are evaluating an offer from a Buyer, a Seller's house that you are making an offer on, or evaluating a prospective tenant, you can use some of the following searches to find valuable information.
Step 1. Search Official Records.
If you go into the Public Records for your County you can see all the documents recorded against an individual or corporate entity. The difficulty will be if you have a common name. For example, in Miami a name like Maria Garcia is very common and you will get a lot of documents that may not relate to your individual.
The link for Miami-Dade County Official records is here:
The link for Broward County Official Records is here:
Step 2. Search County Records for Previous Court Cases.
Usually, if you find previous cases you can obtain valuable information depending on your situation. If you are evaluating a potential tenant, finding previous evictions will be valuable information. If you are considering purchasing a home I have found that the Seller had an open case where he was making a claim on a Buyer's deposit.
The link for Miami-Dade County Case Search is here:
The link for the Broward County Case Search is here:
Step 3. The Property on Property Appraiser's Site.
Most realtors research the property itself on the Property Appraiser's site to learn the previous owners name and view details on the lot such as lot square footage and building square footage.
If you scroll down to Sales Information, you can see all the previous sales of the property. If you see a lot of Deeds where the property is sold for $100.00, it means there was a deed for the minimum amount of consideration the Clerk's system will allow. As such, when you see transfers for no consideration, these are typically red flags for us attorneys. Simply stated, people don't usually give away their interest in a property for "free" (or $100.00). The additional issue is that typically these transfers create problems for purposes of insuring title on a property as the title agent will need to make sure none of the previous owners have any outstanding issues such as judgments and liens (such as tax liens) against them. For example, the following is a search which has a lot of red flags:
If you go on Sunbiz.org you can do anyone of the following searches
If someone is buying under a corporate entity, you can determine:
How long they have been in business;
Names and addresses of other individuals with an ownership interest;
Use their names to find other corporate entities they are associated with;
You can then go back to Official Records and look up Deeds under those corporations. You can then look up those corporations on a Court Case Search and see if they have previously been involved in litigation.
This is usually helpful to determine the transaction history of an investor and see if you can determine any patterns. I also use it to determine if the investor is actually sophisticated or has no proven track record and may not even be an actual investor.
Step 5. Social Media.
This one is pretty obvious and yet so often overlooked. You can search the person's name on Google (or your favorite search engine) and look at their social media presence. Do they have a professional business page? Are they well rated. Can you see their personal profiles. Look at their comments to others.
Conclusion. These searches usually require just a few minutes of your time. At the same time, these searches can save you from wasting considerable time on a transaction which may have problems which others may not catch at the outset.
As always, if you have any questions, want to discuss a situation or otherwise just chat real estate you can email me direct, firstname.lastname@example.org.