How long will due diligence take on vacant land once I sign the purchase and sale agreement (PSA)?
It’s very important for a Buyer of vacant land to remember that it will be their responsibility to know what they are buying. The Buyer needs to build plenty of due diligence time into the PSA for purchase so that they can determine what issues might be present. The Buyer may have to coordinate with several regulatory agencies to determine if developing the property is even feasible. Wetlands, buffer zones, storm water mitigation, environmental issues, timber harvesting, slope evaluations and a myriad of other issues should be reviewed to the Buyer’s or their representative’s satisfaction. Knowing that additional monies will have to be laid out for complex permitting and mitigation may allow a buyer to negotiate a better price for the property, leaving them with the funds to complete the development even with the major site challenges and costs they may face.
What are wetlands and how do they affect the value of property?
For regulatory purposes under the Clean Water Act, the term wetlands means “those areas that are inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs and similar areas.”
There is no limit on the size of the property that can have wetlands and; therefore, be subject to permitting and potentially the need for mitigation if wetlands end up being impacted. Permitting wetland impacts and providing compensation for those impacts can be costly and time consuming and should be considered by the Seller when placing a value on property. The Seller has the choice of addressing these issues prior to the sale of the property, in which case they may be able to recoup some of the money laid out for those activities or of leaving it up to the buyer to tackle them.
What does a City Planning Department do and does it have a lot of influence on local development?
City Planning Departments work to guide the present and future growth of a city by striking a careful balance between residential, commercial, recreational, and institutional needs. A planner makes the best use of a community’s resources, solves current community problems, and protects important physical and geographical landmarks, all while considering how the future needs of a city will fit in. Planners must analyze street and highway capacity, location and capacity of water and sewer lines, schools, libraries, cultural sites, and so on. Once all the data has been collected and analyzed, city planners work with neighborhood groups, business leaders, police/fire services, and government officials to determine the needs of the community. They deal with zoning and building codes and environmental regulations to ensure that the plan is legal and will work within existing codes.
What is a draw inspection?
When banks, and other lenders, make construction loans, they need to confirm that funds are being paid out, and the work is being completed in a timely manner. To protect themselves, and their investor’s money, these institutions will contract with inspection firms to give – usually on a monthly basis – updates on the progress of the project. It works like this: The builder turns in to the lender paperwork, stating what work has been completed and requesting the funds that he or she expects to have “released” to the company account. The draw inspector is then called in, on the bank’s behalf, as an impartial party to see that said work was really completed by the builder. The draw inspector will assess the progress and take photos of various systems and components: footings, foundation, power hookups, landscaping, siding, roofing, trusses, floors, etc. The draw inspections take place over the term of the project – SFR, multi-family or commercial – while the structure is being built from the ground up.
What is REO or distressed property?
Real estate owned or REO (typically distressed property) is a class of property owned by a lender – usually a bank, government agency, or government loan insurer – after an unsuccessful sale at a foreclosure auction. A foreclosing beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount. If there are no bidders that are interested, then the beneficiary will legally repossess the property. This is commonly the case when the amount owed on the home is higher than the current market value of this foreclosure property, such as with a high loan-to-value mortgage following a real estate bubble. As soon as the beneficiary repossesses the property it is listed on their books as REO and categorized as an asset (non-performing asset).
How is improved real property protected when there is no homeowner on-site?
Unoccupied REO and privately-owned investment property may need repairs and maintenance, both to satisfy property upkeep laws and to preserve and prepare the property for sale. A specialized property preservation company is sometimes hired to secure and take care of these properties. These property preservation services include: securing a property (changing locks, boarding up broken windows, debris removal) property maintenance (winterizing, cutting grass, repairing of roof leaks) and in some cases remodel or rehabilitation. In addition to preventing damage to the property, securing a property is used to prevent or discourage vandalism and drug activities which can both damage the property and require law enforcement involvement, further complicating a sale. Additionally, such attractive hazards as swimming pools must also be secured to prevent deaths or injuries from drowning and falls.