The Benefits of Virtual Data Rooms in Real Estate DealsAuthor: Lauren Hawells
Growth over the past few years in various real estate markets around the world has led to fears of a repeat of the 2007-2008 global financial crisis. While you might think that we learned from our mistakes, this fear of possible asset price bubbles should not be taken lightly. Buyers should adhere to standard procedures and regulations for future purchases in order to minimize the risk of another meltdown occurring. For example, to try and mitigate any uncertainty in making a purchase, thorough due diligence should be performed on the initial acquisition. Here’s how Virtual Data Rooms (VDRs) can benefit real estate companies in performing due diligence, and why any company seeking efficiency, accuracy and security should be using them.
The due diligence process can often lead to many issues and can take up important time, especially in a fast moving real estate market. If documents are not properly secured, organized or maintained, your company might fail to comply with due diligence regulations and hefty fines could be incurred. VDRs allow for superior organization and access control, thus allowing for the due diligence process to be completed practically instantaneously. In a time and resource sensitive world, not having to spend so much time performing due diligence is invaluable to both parties involved in a real estate transaction.
Drooms, a secure cloud computing software provider, presented a brief questionnaire to European real estate professionals at the Expo Real 2014. The findings of this questionnaire supported the idea that there was a need for standardization within the real estate market. 97% of the respondents agreed that regulation would lead to greater efficiency. The technology behind the new generations of VDRs means that they are no longer just platforms to perform due diligence, but they can even be used to track the entire life cycle of an asset. They can act as a centralized repository for all transaction-relevant documents, which means that due diligence will become a mere formality as the software will practically do everything for you. Jan Hoffmeister, the MD of Drooms, believes that further digitization of the real estate sector is inevitable, so the sooner you get your business onto the cloud, the better.
Besides the due diligence process becoming smoother, the overall transaction process is streamlined with the use of a VDR for document sharing. Before VDRs, physical data rooms were used to store important documents. This meant that firms, clients and investors all had to be present within the room to view the data. Being able to access the information in the VDR from anywhere and at any time allows for a swift and secure transfer of data from business to client. This will result in faster decision making from both sides of a deal, and hopefully will lead to a smooth transaction.
One of the key features of Virtual Data Rooms is their organisational tools. You don’t want your business to be hindered by potential clients backing out of deals due to unprofessionalism. VDRs offer automatic organizational features that can help you sort your data into the relevant sections and sub-sections. Not only will this make the process easier for your firm (such as when performing due diligence), but potential clients will appreciate the time put into it. The decision about whether or not to perform a transaction with a firm can often come down to their professionalism, and having a well-organised VDR just gives you that little boost that you might need.
Security is, of course, one of the top priorities when it comes to data sharing between firm and potential client. VDRs offer unparalleled cloud security, with the highest commercial-level encryption and firewall protection made available for your use. Their server rooms are safely guarded by experienced security personnel and/or cameras, so there won’t be an issue with the physical protection of your data. You don’t want your (or your client’s) confidential documents being released to anyone on the internet, so the data encryption and server protection offered by Virtual Data Room solutions are indispensable.