Insurance companies figured out real fast that it is in their best interest to make sure that real estate buyers do what was in the best interest for the buyers – which is to protect themselves from the sellers. Business brokers have not had enough lawsuits filed against them, for negligence, only because plenty of buyers are too embarrassed to admit that they didn’t do a business inspection and they really should have.
When you make a mistake on a house it can cost you $5,000 to maybe $25,000 to fix it.
In a few cases where the foundation was cracked or some other major problem it could run as high as $100,000 to fix it.
The smallest error in buying a business can cost you $25,000 to mitigate and major errors always equal 100% of the purchase price.
That is because the business was worthless and losing money every week.
When you make a mistake in buying a house it can be a headache until it is fixed and it costs you some money.
When you make a mistake in buying a business it can mean you are working 80 hours a week for little or no profit for years and many times this can wipe out a buyers life savings.
So my recommendation is to never buy real estate without all possible inspections and do not buy a business without a complete due diligence and inspection.
History has shown conclusively that a dollar invested in due diligence returns $20.00 in savings and $100.00 in protection. That is because 99% of the time, an inspection reveals a list of minor issues and over 70% of the time the inspection turns up something really major. These major issues commonly take $50,000 or more to mitigate. This may sound unbelievable especially when having a full due diligence business evaluation usually costs a lot less than 2% of the purchase price and that is to protect 100% of the purchase price. Does that sound like a good return on your investment? It is.
Due Diligence Definition: The phrase is composed of two words. Due, which the dictionary defines as “proper or adequate”, and Diligence, which is defined as “Degree of care or caution expected of a person. Especially as a party to an agreement.” Caution: is the watchword in this definition.
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