Bass, Berry & Sims attorney Gil Uhlhorn outlined a rising trend in commercial real estate transactions stemming from ongoing global supply chain challenges. Third party companies that support due diligence and documentation for buyers have also been affected by the supply chain crisis which has made it difficult for buyers to quickly complete their standard due diligence.

“In this COVID-19 environment with supply chain delays and worker shortages across all sectors, third-party real estate diligence vendors – like title companies, surveyors, environmental engineers and appraisers – are feeling the strain like other industries,” Gil said. “As a result, it is taking purchasers longer to get their standard diligence reports for review from their providers.”

The delays involve crucial documentation, such as title commitments, surveys, property condition reports, Phase I environmental site assessments, appraisals and more. “This trend is making the push for shorter diligence period and closing periods even more stressful on potential purchasers,” Gil added, saying the firm is witnessing its emergence in many markets.

Gil added that shortened due diligence periods are one popular concession of many that sellers are requesting in today’s competitive market – along with nonrefundable deposits, which he discussed in an earlier article available here.

“In addition to nonrefundable deposits, sellers can demand other concessions from potential purchasers like increased earnest money deposits, shorter diligence periods, shorter closing periods, fewer seller representations and warranties, lower caps on liability for breaches of representations and warranties, or fewer conditions to close,” Gil said. “In a hot apartment market, a purchaser will need to stretch to make returns pencil out and to ensure that its offer is the best to win the deal.”

The full article, “Sellers Push for Shorter Due Diligence Periods Amid Supply Chain Issues,” was published by on March 7 and is available online (subscription required).