Mitigate Risks with Technology
- Mar 12, 2009
In today’s market, it is critical to protect yourself from the legal risks involved in conducting real estate transactions. And when it comes to due diligence, technology can help. Poor or insufficient due diligence can lead to litigation, and the seller can be considered to blame. Among the questions that can come up: Was the asset fully exposed? Did the seller provide the entire document repository necessary to close on the deal? In the case of an incorrect estimation of value, who is to blame for the miscommunication? If a deal falls apart, who is responsible? Technology can address such questions. Specifically, virtual deal room (VDR) technology is behind some of the largest, most complex war rooms across the real estate industry. A secure online version of the old physical boardroom-style due diligence sites, VDRs are today’s vehicle to proper due diligence and are thus one of the most efficient ways for sellers and their brokers not only to reduce risk in transactions but also to improve the overall likelihood of success.VDRs securely host the due diligence for the valuation of an asset in order to assess whether to proceed with a proposed transaction, and they enable sellers to readily monitor user activity and gather intelligence related to buyer interest.Full disclosure: Full disclosure audit capabilities are among the most important elements of any transaction. The VDR provider you choose should be able to readily monitor its users’ movements. Once the transaction closes, comprehensive auditing reporting capabilities should be able to provide important proof against non-disclosure claims if called upon in court or litigation instances.Recently, I was made aware of a litigation case in which the potential buyer’s access to the available due diligence was in question. The technology in the VDR provided definitive proof of full disclosure and a complete audit of when and at what time the due diligence was accessed. The simplicity in finding this information using the VDR technology as well as the solid evidence it provided proved a tremendous and immeasurable tool for the seller and broker in defending and protecting themselves. Asset exposure: Using third-party property marketing technology with qualified databases will increase the asset’s exposure and help mitigate the risk of the owner stating the broker or investment banker did not do everything possible to properly expose their asset. By using a third-party provider, you will ensure that all of the qualified investors are at least exposed to the deal and are pulled into your audit trial.However, if you use a third-party qualified database, it is recommended that you see the list of potential purchasers for your deal in advance to ensure quality. Make sure you can then edit the proposed list and securely import your own list to create the ultimate guest list of potential bidders for your offering.Security: Information security is a hot topic today. There are unsettling news reports every day of security breaches in which information is wrongfully accessed. Why hold your own company accountable for those breaches? Outsource to experienced service providers who can allow you to easily grant or deny access to potential investors. By outsourcing your technology and security, you can quickly improve the quality of your services, increase your operational or financial efficiencies and, in many cases, reduce costs. It is now more important than ever to mitigate your risks and legally protect yourself and your firm in your transactions. Virtual Deal Room technology will help safeguard your firm, allowing you to increase your focus on core business functions and accelerate the transaction timeline. Stephen J. Alter is CEO of Real Capital Markets.