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» What Does the Due Diligence Down Payment Pay For?

Posted on 6/24/2005
Many brokers and borrowers want to know about the use of funds of the down payment toward the third party costs of due diligence. What does the due diligence down payment pay for? Here is a list of what that money will cover:
 
Avatar's appointed appraiser will be sent to the subject property walk and review the subject property. It is advanatageous for the owner to be present and to point out issues that will maximize the appraisal sum, such as:
  • excellent maintenance of the facility
  • improvements, new or replaced items that may not be visible
  • energy-saving alterations to optimize lighting, fuel consumption, etc.
  • other uses for the building(s)/property which will increase the resale value
  • proximity to growth areas, road imrpovements or traffic alterations that will be advantageous to a business occupying the building, etc.
The due diligence cost will also be used for the travel expenses for Avatar's CEO or president to come to the property and personally conduct the second inspection required to complete due diligence. Once again, it will be advantageous for the borrower to be present to show him around.
 
The due diligence down payment also pays for legal, document preparation and escrow costs, which are generally nominal.
 
At closing, the sum is credited against those expenses and any balance is refunded to the borrower. In the event that more is spent on due diligence than is covered by the down payment, Avatar will wrap those costs into the loan to cap the out of pocket expenses of the borrower.
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