By Justin Yelda, Associate at Locations Commercial Real Estate Services
It’s safe to say you learn something new every day. As an effective and informed commercial real estate salesperson, you have to keep an eye out for potential issues. Whether you are representing the buyer or the seller, fifteen minutes of simple research can give you and your client peace of mind during the sale process, and avoid potentially deal-breaking surprises. There are so many little things that can make a BIG difference in the sale of a property. Yes, the title company will uncover many of these issues (eventually) but a little due diligence can help you discover, and address, potential problems early in the process – saving time and possibly even saving your deal. Here are five things to watch for:
- Lot Size and Square Footage: Most counties have site maps available showing lot lines, easements, etc., and it’s easy to call the city, township or county, or access online records, to review assessment data. Always make sure the square footage of the building recorded with the city/county matches with the size on actual property listing. There are times when the square footage might not be as straightforward as you think. Never assume that mezzanines, lean-to sheds and even outbuildings aren’t included in the total square footage stated in the listing. Ask the listing broker and double check with assessing.
Mezzanines are commonly found in industrial buildings. On a recent deal, I was caught off guard with a building that had a mezzanine in it. The total square footage of the building was shown on the listing flyer as 12,400 square feet. However, when I looked at the online city assessment records for that property, I found out the floor area of the building was actually 10,404 square feet. The listing did not mention that the mezzanine was included in the total. Including the 1,996 SF mezzanine in the total building size reduced the price per square foot. Fortunately, the buyer had his heart set on the building and continued with the transaction. But in many cases, if I had to guess, this would either be a deal breaker or a re-negotiation of the sale price.
- Zoning: Review the zoning ordinance to see if the buyer’s intended use of the property is permitted. Your buyer should contact the local planning/zoning department and verify that there are no zoning restrictions that would interfere with their proposed use of the property.
- Water Bills: Water bills follow the property and transfer to a new owner. Check with the water department to identify any past due water bills that have not been added to the tax rolls yet. For example: if there was a recent water leak in a vacant property, chances are that water bill is sky high. Your Purchase Agreement should specify who is responsible for any outstanding water bills.
- Special Assessments: Check with the municipality to see if there have been any sidewalk or road repairs, drain, water or sewer line assessments; or any other ongoing annual assessments that affect the property. Be sure your purchase agreement spells out whether the buyer assumes any ongoing assessments or the seller pays them off at closing.
- Taxes/ Liens: Again, this is something the title work will discover, but dealing with any necessary paperwork to clear up liens and delinquent taxes can take some time. It doesn’t hurt to do a quick check with the city and county to see if there are any potential issues. Construction liens are common and people don’t always remember to remove them. Ask for copies of any contractor and sub-contractor lien waivers. Being proactive can reduce potentially costly delays later on.
