So, you’re thinking about buying your dream property in Bali—exciting, right?
But before you dive in, there’s an important process you need to understand: due diligence.
This process ensures that everything about the property is checked out before you make the big investment.
In this article, we’ll break down exactly what happens during due diligence and why it’s so important for buyers, especially foreigners.
What Is Due Diligence?
Simply put, due diligence is a thorough investigation of the property you want to buy.
It involves checking the legal status, ownership, potential risks, and any hidden issues that could impact your investment.
Think of it as the “inspection” before the big decision. It ensures you’re making a safe, informed purchase.
Why Is Due Diligence Important?
Buying property, especially in a foreign country like Bali, can have complexities. Due diligence protects you from surprises, like:
- Avoiding Legal Issues: Ensuring the property has no legal disputes.
- Verifying Ownership: Making sure the seller truly owns the property.
- Checking Zoning Laws: Confirming that you can use the land for your intended purpose, whether for building or renting.
- Confirming Property Boundaries: Verifying the exact size and borders of the property.
Without a solid due diligence process, you risk losing money, facing legal problems, or even losing the property altogether.
Now, let’s look at the steps involved in due diligence.
What Happens During the Due Diligence Process?
Due diligence is a multi-step process designed to verify every aspect of the property you’re buying. Here’s a step-by-step breakdown:
Process #1: Title Search and Ownership Verification
The first and most crucial step is to ensure that the person selling the property truly owns it. This is called a title search and ownership verification.
In Bali, ownership is confirmed through a document called SHM (Sertifikat Hak Milik), which means “Certificate of Ownership.”
This document proves who owns the land or villa, and you’ll want to ensure that the seller’s name matches this certificate.
Sometimes, properties have multiple owners (especially inherited land), or a bank loan might be tied to the property. Discovering these details is vital to avoid issues later on.
Process #2: Legal Compliance
Next, you need to ensure the property complies with all local laws. For example, if you’re buying a villa, does it have an IMB (Izin Mendirikan Bangunan)? This building permit confirms the villa was built legally.
Additionally, Bali has restrictions on how close to the beach you can build and height limits for buildings. It’s also essential to ensure the land isn’t in a protected area due to cultural or environmental significance.
Process #3: Environmental and Physical Inspection
This step is all about evaluating the property’s condition and surroundings.
Is the land suitable for building?
Are there potential natural hazards like floods or landslides?
If you’re buying a villa, you’ll want to inspect the structure—check for any damage, leaks, or wear and tear.
Also, assess the area’s infrastructure like water supply, electricity, and accessibility. These inspections will save you from costly repairs or issues down the line.
Process #4: Financial Verification
It’s not just about the buying price—you also need to consider hidden financial factors.
For instance, check for any outstanding taxes, unpaid bills, or other fees tied to the property. These can include electricity, water, or community fees. You don’t want to inherit the previous owner’s debts.
Also, ask about ongoing costs—such as maintenance fees or security charges—especially if you’re buying a villa in a complex.
Process #5: Survey and Boundary Check
Finally, you need to confirm the exact boundaries of the property. In Bali, property lines may not always be marked with fences or walls, so hiring a surveyor is essential. They will measure the land and verify the boundaries match the legal documents.
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.
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?
Why You Need a Real Estate Agent
Navigating Bali’s property market can be tricky, especially for foreigners unfamiliar with the legal and cultural nuances. This is where a local real estate agent comes in. They handle the due diligence process for you, ensuring that all legal requirements are met, and they help you avoid costly mistakes.
At Bali Villa Realty, we help you to:
- Arrange inspections and paperwork
- Verify land certificates and legal compliance
- Explain everything in easy-to-understand terms
- Ensure the transaction goes smoothly
In short, we do the heavy lifting, so you don’t have to.
Buying property in Bali is exciting, but the due diligence process is essential to protect your investment.
From verifying ownership to ensuring legal compliance, each step is crucial in ensuring everything is in order.
While the process can seem overwhelming, working with an experienced real estate agent like Bali Villa Realty simplifies the journey. They’ll guide you through every step, allowing you to invest in your Bali dream property confidently.
So, whether you’re eyeing a villa or a piece of land, take the time to do your due diligence—and let the experts help ensure the safety and security of your investment.
