Abstract
Abstract International real estate transactions, especially in countries with different legal systems, are characterised by the fact that each transaction is unique in its complexity, confidentiality, different risk factors, and the limited availability of information regarding the real estate. The Due Diligence (DD) process is an instrument that can help avoid or at least reduce risks and assist in making important decisions regarding real estate transactions. The term “Due Diligence” has a number of different meanings. The aim of this paper is to determine the etymology of this term and to identify its most common contemporary meaning. Each DD process is to be recognised as a project requiring management because of the potentially high number of individuals that could be involved.
Highlights
International real estate transactions are characterised by the fact that each transaction differs and dictates variable requirements and approaches (Guidelines for Due Diligence on Real Estate in the UK, 2013), is unique with its complexity (Seabrooke and How, 2004), confidentiality, limited availability of information regarding the real estate, as well as its interdisciplinarity (Malloy, 2005), and especially, because of the relatively high property values and transaction costs
It is widely understood that the DD process is requested by the buyer ( “Acquiror Due Diligence” or “Buy Side Due Diligence”) and should always precede the transaction of real estate
DD has a number of definitions, for example: − A checklist, which is a systematic approach to identify all essential factors to be taken into account when acquiring real estate
Summary
International real estate transactions are characterised by the fact that each transaction differs and dictates variable requirements and approaches (Guidelines for Due Diligence on Real Estate in the UK, 2013), is unique with its complexity (Seabrooke and How, 2004), confidentiality, limited availability of information regarding the real estate, as well as its interdisciplinarity (Malloy, 2005), and especially, because of the relatively high property values and transaction costs. According to the following sociological survey: “The proportion of shadow economics in real estate transactions, individual expertise and proficiency in civil law transaction deals and common problems”, organised by the marketing and public opinion research centre “SKDS” in 2015, as much as 44 % of the private agreements used in real estate transactions are drafted by the individuals themselves, not by professional lawyers (Litvins, 2015). This implies that the parties buying and selling real estate often believe that they themselves are sufficiently qualified to conduct real estate transactions without a thorough analysis of the legal process, economic, planning and construction aspects. The current legislation of Latvia was analysed and pertinent literature was reviewed during the research
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