When purchasing property, there are a lot of details to track. Failing to hire an experienced real estate broker could cost you both time and money if just one of those details is overlooked, says Eliot Kijewski, a sales associate at CRESCO Real Estate. “By following a purchase agreement abstract, the buyer can help ensure that proper due diligence is done and that there aren’t any surprises after the deal has closed,” says Kijewski. Smart Business spoke with Kijewski about how an experienced real estate broker can help you avoid costly mistakes. What is the first step when considering purchasing property? A purchase agreement abstract provides a checklist of steps to follow. It breaks down the purchase process for both the buyer and the seller and ensures everything is done properly. Following this, the first step is for the potential buyer to provide earnest money to a quality title company. In addition, almost any transaction of more than $350,000 requires an environmental policy assessment. However, if it is a known hazard area, such as a gas station or a site that is otherwise suspect, that assessment will be required. In Phase 1 of the assessment, which costs $2,000 to $5,000 and averages three weeks, the history of the property and all its known prior uses are examined. If the buyer is going through a lender, this phase may not be optional, even with a low purchase price, as the lender will almost always require it. If Phase 1 comes back with suspect information — for example, if the site had heavy industrial use or hazardous chemicals have been used on site — there will be a Phase 2. Further testing will be conducted and samples are sent to a lab. This phase generally starts at about $9,000 and can become really expensive, and it averages six weeks. Neither side may want to pay for the study, but it’s critical to provide the buyer and the seller with peace of mind about the transaction. In some cases, the potential buyer and seller may choose to share the cost. If Phase 2 comes back inconclusive and the transaction is called off, each side has lost just a little, versus the entire cost of the purchase. How can surveys help ensure buyers know what they are getting? Surveys are an important tool used to identify the boundaries of a property and can be general and inexpensive. However, an American Land and Title Association survey can provide more in-depth information should you want to know more about what you are buying. An ALTA survey is very detailed and shows you exactly what you are purchasing, such as the utilities, the topography, etc. Having this survey done is always a good idea, but it can be very expensive depending on the size of the property and the complexity. Another advantage is that you may understand the potential of existing wetlands. What are the next steps? Hire a trained professional to do a building inspection. That person will check its structural soundness, the HVAC system, the roof and electrical system mechanicals. Also have the IT system inspected to gain an understanding of its capacity. At this stage, you should also arrange for phone and IT services because those can take a long time to install. If the sale doesn’t go through, you can cancel it. Also ask about warranties on the roof, the HVAC system and other items for which a warranty may transfer from the buyer to the seller, and find out how much time is left on those to understand potential future costs. How can incentives and zoning affect a sale? Check with the municipality to see if anything is available to help you with financing or if there are incentives that can make it a more attractive purchase. Also talk with the state and county to see if there is anything they can offer to sweeten the deal. You should also check the zoning to ensure that your intended use of the property is acceptable. If you’re going to need a variance, you need to know about it before you commit to the purchase. What does a potential purchaser need to understand about financing? Assuming that you are financeable, check with your lender to see how quickly it can complete the transaction. Otherwise you might find yourself in a situation in which the due diligence is done and you’re ready to move forward, but the bank can’t finance for another four weeks. Also consult with a broker to see who’s doing deals, as banks have SBA programs that can help. With these loans, the government accepts a large part of the responsibility for the project, allowing you to lock in rates. These loans are not the easiest to obtain, but they can provide a huge benefit. Once you have completed all of the steps, it’s time to close the deal and determine when everything will be in place so you can move in. Is this process something the average business owner can accomplish on his or her own? No. You definitely need help. Even experienced building owners still hire brokers, attorneys and other professionals to help them through the process. If you try to do it yourself, you will overlook some of these critical steps because you’re not used to doing them on a daily basis. Your broker can keep things moving along and hold the deal together. Eliot Kijewski is a sales associate at CRESCO Real Estate. Reach him at (216) 906-2414 or [email protected]. Insights Real Estate is brought to you by CRESCO Real Estate
