You can’t buy a property without completing due diligence. It’s a process of thoroughly investigating the property you want to purchase. The goal is simple: to make sure your dream property has no legal issues.
Due diligence also involves several steps, such as checking the legal status, verifying ownership, identifying potential risks, and uncovering any hidden issues that could affect your investment.
Curious about what happens during the due diligence process and how to do it right? Let’s dive in and find out!
1. Title Search and Ownership Verification
The first and most crucial step is to ensure that the person selling the property truly owns it.
In Indonesia, ownership is confirmed through a document called SHM (Sertifikat Hak Milik) or “Certificate of Ownership”. This document proves who owns the land or villa legally, and you have to ensure that the seller’s name matches this certificate.
But there’s more to note. Some properties in Bali may have multiple owners, especially when land has been inherited and not yet split formally.
In other cases, the property might be tied to a bank loan or mortgage. All of this needs to be uncovered early on so you don’t run into problems later.
Read More: Can Foreigners Buy Property in Bali? Ultimate Guide 2025
2. Legal Compliance
Next, you need to ensure the property complies with all local laws.
For example, you have to check if the villa you buy has the building permit called IMB (Izin Mendirikan Bangunan). This permit confirms the villa was built legally.
There are also zoning rules you need to watch for. Bali has strict limits on how close you can build to the beach, and there are maximum height rules for buildings.
On top of that, some land is considered culturally or environmentally protected, which means you may not be allowed to build at all.
You can learn more about Bali land zoning rule here: Bali Land Zoning Explained: 6 Area to Watch Out
3. Environmental and Physical Inspection
This step is all about evaluating the property’s condition and surroundings. You can ask the owner or your real estate agent these following questions:
- Is the land stable and safe for building?
- Are there any risks like flooding, erosion, or landslides?
- What’s the soil quality like?
However, it’s also important to check the physical condition of the building by yourself. Look out for cracks, roof leaks, plumbing issues, or signs of mold and wear.
Don’t forget to review the area’s infrastructure too. Check if there’s reliable access to clean water, electricity, internet, and roads. Skipping this step could lead to expensive repairs or future headaches.
4. Financial Verification
Now, let’s talk about money. It’s not just the buying price, but also hidden financial factors.
Ask the seller if there are unpaid taxes, utility bills, or outstanding community fees (like Banjar or security fees). These debts can legally carry over to the new owner.
Also ask about ongoing expenses. For villas in gated communities, there may be monthly maintenance, security, or shared facility fees. Understanding these costs upfront helps you plan your budget better.
5. Survey and Boundary Check
Last but definitely not least: make sure you know exactly where your land begins and ends.
In Bali, land boundaries aren’t always clearly marked. Fences, walls, or natural dividers can be misleading—or missing entirely. That’s why it’s important to hire a licensed surveyor.
A surveyor will measure the land and confirm that the physical boundaries match what’s stated in the legal certificate. This protects you from future land disputes with neighbors or potential overlaps with public land.
Read More: How to Choose the Right Villa Developer Bali: Best Practice
How Much Is Due Diligence Cost?
The cost typically ranges from USD 1,000 to USD 5,000, depending on the complexity.
You’ll also need to pay a notary fee, usually 1-2% of the property value, to ensure all legal documents are handled correctly.
Villas vs Land: Due Diligence Differences
The due diligence process differs slightly depending on whether you buy a villa or land.
- For Villas: The focus is on the structure, ensuring the building has the proper permits (IMB) and is in good condition. Any structural issues, electrical problems, or hidden damages are inspected.
- For Land: The emphasis shifts to zoning laws and environmental suitability. Can you build on the land? Is it in a flood-prone area? Does it comply with Bali’s zoning regulations?
FAQ
1. What happens after due diligence period?
Once the due diligence period ends, buyers usually can’t cancel the deal without losing their earnest money—unless there are still valid contingencies like financing. If both parties agree, the due diligence period can be extended.
2. How long does due diligence take?
Depending on the property, the due diligence process can take anywhere from a few weeks to a couple of months.
3. Why is due diligence important?
It helps people and companies make smarter choices by digging into and reviewing the details of a possible deal or investment.
Conclusion: How to Conduct Legal Due Diligence Correctly
Now you understand what happens during the due diligence process. Navigating Bali’s property market and regulation can be tricky, especially for foreigners who may not be familiar with the legal and cultural details.
That’s why the best way to handle legal due diligence is by working with a professional real estate agent.
A trusted real estate agent will manage the due diligence process for you, making sure all legal requirements are met and helping you avoid costly mistakes.
Look no further! You can use the services of Bali Villa Realty by Ilot Property.
We will help you by:
- Arranging inspections and handle paperwork
- Verifying land certificates and legal compliance
- Explaining everything in clear, simple terms
- Ensuring your transaction goes smoothly
In short, we do the heavy lifting—so you don’t have to.
Interested? Click the button below to claim a free, no-obligation consultation with one of our expert agents.
