What is real estate due diligence?
Definition and objectives
Real estate due diligence is the thorough investigation carried out before a property purchase to verify legal, financial, and technical aspects.
Traditional vs. off‑plan property
For off‑plan purchases, this review is even more critical since the property does not exist yet; everything depends on the developer’s solvency, permits, and financial guarantees.
*Field note: I have seen international buyers lose money by not checking the building license or the developer’s real status.
Why due diligence matters in off‑plan property
Common risks in off‑plan transactions
- Under-financed developers.
- Pending permits.
- Delivery delays.
- Unfair clauses.
Real case insights
A foreign client nearly signed while the developer faced lawsuits. Due diligence surfaced the issue and the deal was renegotiated.
Know Your Client (KYC)
Buyer and seller identification
KYC verifies:
-Identity.
–Source of funds.
-Basic solvency for buyers and sellers.
Risks of poor KYC
Weak KYC can lead to fraud, money laundering, or even annulment of the transaction.
Anti-Money Laundering (AML)
Applicable regulations
AML rules require verifying source of funds and flagging suspicious operations according to law.
Red flags in international transactions
- Cash or split payments.
- Shell companies or opaque structures.
- Funds from high-risk jurisdictions.
Banks and notaries may overlook red flags; strict due diligence is the only safeguard.
Essential documentation
Permits, contracts and guarantees
- Building permits and planning aprovals.
- Purchase contract and annexes..
- Bank guarantees for deposits.
- Plans and specifications.
Developer solvency and financing
Request documented proof of financial solidity (audited accounts, track record, committed financing). Advertising is not enough.
Practical due diligence process
Legal checks
- Contracts, permits, Land Registry.
Financial checks
- Developer solvency, guarantees, financing terms.
Technical checks
- Plans, site inspections, code compliance.
Practical tips from real experience
What you should never overlook
- Valid building permit.
- Bank guarantee for deposits.
- Developer´s track record.
Recommendations for international buyers
- Hire an independent lawyer.
- Do not rely only on the agency/developer.
- Verify AML/KYC compliance.
Conclusion
Due diligence is the key tool to protect your investment in off‑plan property. Core message: verify the developer, review documentation, and apply KYC + AML without exceptions.
Frequently Asked Questions (FAQ)
A legal, financial and technical validation list.
Demand permits and bank guarantees.
Safeguard the buyer’s interests and ensure compliance.
Are you considering buying an off-plan property?
At Mael Abogados, we offer you
-Exhaustive analysis of the project´s legal viability.
-Expert review and negotiation of the reservation and purchase contracts.
-Rigorous verification of all licences and permits.
-Confirmation and monitoring of the legal guarantees for all payments made.
-Comprehensive assistance up to the signing of the public deed and the handover of the keys.
Contact our lawyers
