Real Estate DD in the Transaction Process

Strategic purchasing decision

In phase 1 of the transaction the buyer is required to make a strategic purchasing decision.

The starting point for the purchasing decision is the decision on

  • diversification in real estate investments
    • Investment volumes
      • Geographical (Switzerland and location in Switzerland, A or B locations)
        • Type of premises (retail, logistics, office or residential property and so on)
  • the goals
    • Investment period / exit point
      • Target rates of return
        • Appreciation or profit optimisation
  • basic action plan
    • Project team
      • Responsibilities
        • Schedule

Whether an “early Market Due Diligence” is appropriate for the strategic purchasing decision must be assessed on a case-by-case basis.

Search profile

The buyer is responsible in the run-up to the Real Estate DD for

  • instructing an adviser
  • analysing the market environment
  • compiling a list of criteria
  • specifying preferences
  • creating a search profile

Portfolio identification

The investor begins his transaction process by

  • identifying potential vendors
  • requesting short profiles
  • matching the short profiles with the search profile
  • requesting an info memorandum for a non-disclosure agreement
  • analysing the info memorandums and making initial inquiries of the vendor
  • replying to the vendor and poss. determining the way forward

Real Estate Due Diligence

The buyer conducts the Real Estate DD as the next step:

  • He compiles a list of essential information (or company data) and documents.
  • He views the property with his Real Estate DD agent.
  • He conducts negotiations with the management if the property for sale is a real estate company.
  • The Real Estate DD agent conducts the Real Estate DD in the data room:
  1. Market Due Diligence
  2. Legal Due Diligence
  3. Tax Due Diligence
  4. Technical Due Diligence
  5. Environmental Due Diligence
  6. Financial Due Diligence
  • The Real Estate DD agent discusses his list of questions with the vendor and compiles the Real Estate DDR.

Overview: The Real Estate Due Diligence Module

Real Estate Due Diligence

Preparatory Phase

Implementation Phase

Evaluation and Documentaiton Phase

Provision of information Market Due Diligence

  • Real estate market
  • Location of the property
  • Marketability of the property
Production of photo documentation  
Legal Due Diligence

  • Collection / analysis
  • Land register situation
  • Building + planning situation
  • Obligatory agreements to be assumed
  • Poss. verbal agreements
  • Warranty
  • Development costs
  • Statutory charges
  • Builders’ liens
  • Property tax liens
Provision of information Tax Due Diligence

  • Tax ruling
  • Property tax
  • Inheritance + gift tax
  • Capital tax
  • Profits tax
  • Double taxation agreement
  • Tax agreement
Evaluation of the findings  
Technical Due Diligence

  • Structural quality of the property
  • Space requirements of user(s)
  • Construction costs relative to assessment of rate of return
  • Running costs
Compilation of the checklists Environmental Due Diligence

  • Identification of threats to the land + building, also by geologists + asbestos technicians; costs of protective measures
  • Refurbishment costs
  • K.o. question
  • Clarification of approach (refurbishment by vendor or buyer refurbishment, with price reduction?)

Real Estate DD Report

Summary and documentation of the findings  

Financial Due Diligence

  • Borrowed capital
  • Mezzanine capital
  • Equity capital
  • Credit rating
  • Market + property rating
  • MoriX market + property rating

Reflex Effect of the Real Estate DDR on the Assessment

Unfavourable findings have a negative impact and favourable findings have a positive impact on the assessment.


The buyer:

  • defines his negotiating strategy
  • conducts price and contract negotiations
  • makes a binding offer
  • signs the purchase / closing agreement with the vendor.