You must research the property you’re about to purchase. There are many dimensions to property due diligence tips, including environmental, physical, and financial aspects.
Environmental Due Diligence
Many potential problems could come up when buying a property that hasn’t been adequately maintained or improperly used in past years. One of the best-known issues is soil contamination. If the land contains hazardous waste, it may be prudent to conduct some environmental tests before purchase.
Generally speaking, property owners are not liable for contaminants on their land if they did not put them there themselves; however, sometimes previous users were negligent in disposing of pollutants resulting in contamination. You can ask your real estate agent or attorney for advice on this matter because liability often depends on state law as well as the specific circumstances of your situation.
The first step to environmental due diligence is making sure that you’ve received all of the proper documents for the property, such as recent tax records and reports from governmental agencies. These documents may reveal any history of contamination at the site. It would be best to ask the owner and neighbors about previous uses and (potential) contaminants. Locating underground storage tanks or other sources of contamination can be challenging if they were not initially discovered during a title search, so keep this in mind when looking at potential properties with possible contamination problems.
Physical Due Diligence Depending on how extensive your research has been, you may want to hire professionals to help conduct some inspections before purchase, especially if your budget allows for it. If you have concerns about tenants’ health, a tenant surveyor can help determine if there are any current or potential problems. Structural engineers and other experts may also be needed to evaluate a property’s condition thoroughly.
Physical due diligence should include an inspection of all buildings, structures, and systems both inside and out. Roofs, heating units, plumbing fixtures, and electrical systems are just some of the components that should be thoroughly scrutinized during the physical due diligence period. You might want to consider hiring building inspectors or pest control professionals to perform these services for you; local universities may provide this type of service under their student code programs (for example, Arizona State University offers certification in home inspections).
Financial Due Diligence
No matter how much you trust the seller, it’s important to review financial records to determine if undisclosed liabilities exist. This may include lawsuits from previous tenants or owners, tax liens, and other encumbrances on the property that could affect your ability to own or control it. It is also prudent to check for any prior easements that might have been granted by the previous owner/tenant(s), which are not evident on your recorded documents. Your attorney should provide sound advice on what type of due diligence is appropriate based on local laws, customs, and practices.