Not every property valuation is carried out for the same reason.
Buying property is a major financial decision. Yet many buyers focus primarily on the price, location, and appearance of a property without adequately investigating the asset before committing their money.
Property due diligence in Nigeria involves carrying out appropriate checks to understand the property, its ownership and documentation, physical characteristics, market position, development considerations, risks, and other factors relevant to the proposed transaction.
The exact checks required depend on the property and transaction.
Why Is Property Due Diligence Important?
Due diligence helps a buyer make a more informed decision before committing capital.
It can help identify issues that may affect:
- Future use of the property
- Ownership
- Marketability
- Development potential
- Property value
- Income potential
- Transaction risk
1. Verify the Property Documentation
Relevant documentation should be reviewed to establish the nature and status of the property interest. Legal verification should be undertaken by an appropriately qualified legal professional where required.
2. Inspect the Property
Documents alone do not tell the entire story. A physical inspection can help assess the property’s condition, boundaries, access, improvements, occupancy, and other physical characteristics.
3. Understand the Location
Investigate the surrounding environment and factors that may affect the property’s current and future use. Consider accessibility, infrastructure, surrounding development and market activity.
4. Assess Planning & Development Considerations
If the intention is to develop or redevelop the property, relevant planning and development requirements should be investigated before acquisition.
5. Establish Market Value
Understanding what a property may reasonably be worth is an important part of the acquisition decision. A professional valuation can provide an independent assessment based on the property’s characteristics, market evidence, and the purpose of the assignment.
6. Assess Income Potential
For an investment property, consider:
- Existing rental income
- Potential rental income
- Occupancy
- Operating costs
- Maintenance
- Tenant considerations
- Market demand
7. Consider Development Potential
If you are acquiring land or a redevelopment opportunity, consider whether the property can realistically support the intended development. This may require further technical, planning, financial or environmental assessment depending on the project.
8. Assess the Investment Risk
Consider risks associated with the property, transaction, market, financing, development and intended use. No property investment is risk-free, but informed assessment can help identify issues before they become expensive problems.
9. Don’t Rely Only on the Asking Price
The advertised price is not necessarily the same as market value. A buyer should consider the property’s characteristics, market evidence, condition, documentation, development potential, and other relevant factors.
Who Should Carry Out Property Due Diligence?
Due diligence is often multidisciplinary. Depending on the transaction, you may require input from:
- Estate Surveyors and Valuers
- Property lawyers
- Surveyors
- Architects
- Engineers
- Environmental specialists
- Financial advisers
The appropriate professionals depend on the nature and complexity of the transaction.
When Should Due Diligence Begin?
Before you commit your money.
Due diligence should be undertaken early enough to identify material issues before a buyer becomes financially committed to the transaction.
Professional Property Advisory
Ayeye & Co. can provide professional property-related assessment and advisory services as part of a wider acquisition or investment decision.
Our services include property valuation, real estate consultancy, feasibility and viability appraisal, and investment advisory.
