Due Diligence Checklist

After you get a property under contract you want to open up escrow with a title company and while they research chain of title, you’ll want to conduct your detailed due diligence on the property itself. While the property is in escrow, this is the time to find out any and all details about the property, so that you can still re-negotiate the agreement, cancel, or proceed with the purchase of the lot.

Here’s what you want to check on…

• Market Value
  You want to verify the comparables in the area to ensure you are buying a property at a 10% to 25% discount of current market value.
• Property Dimensions/ Shape
  You want to look at the county GIS map or Plat Map of the lot to see what size each side of the lot measures. You want to ensure that the lot has usable dimensions and is not a measuring error. For example a lot that is 1 acre in size, but is 2 feet wide by 21,780 feet would be considered an unusable lot, by looking at just the acreage, it looks fine, but on the GIS or Plat Map you will see that the lot is unusable, unless a billboard can be placed on the lot.)
• Property Topography
  You want to check to see if the property is on a side of a cliff or not. To find out, check the Terrain layer on Google Maps or see if the county’s GIS system has a topographical layer. The closer the lines are together the steeper the terrain, so you will want to take note of the elevation notations as well as the spacing of the contour lines depicted on the map.
• Environmental Issues
  The more metropolitan the area is, that your property is located in, the more of a concern it is that it may have some environmental issue on the property. Check EPA.gov to find out if the property is in an area that has a known environmental issue.
• Natural Habitats
  Contact the County Assessor as well as Planning and Zoning to find out if there are any natural habitat restriction in this area. If there are, the county should have, or direct you to a map or parcel search where you can check to see if your property is in a protected area like a wetland or preserve that would restrict the use of the property.
• Road Access
  Check the county GIS system as well as Google Maps to see if the property has physical road access. A property that does not have road access can be still be sold, for example to the neighbor, however having a lot with no road access limits your buyer pool and should affect your purchase price. A property also could have legal access and not physical access, this means that there is a legal right away in place to get to the property, however, no physical road actually exists to the lot. This is also something that should affect your purchase price, so you’ll want to check on this and ensure that it is factored into your purchase price.Also if you are unsure of the condition of the roads in the area, check with the county Code Enforcement department and ask them. Code enforcement officers drive all around the county and usually are familiar with the physical state of the roads.
• Zoning/ Development Restrictions
  If you plan to market the property to a builder, or to someone that wants to build something on the lot then you need to gather some information about what they will encounter when they go to build. So, you want to check with the county Planning and Zoning department on the following…
  • What is the property zoned for?
  • What types of structures can be built on it? (don’t assume that just because the neighboring lots have homes on them that this property is zoned for a similar home also – verify this with the county.)
  • What are the setbacks of the lot?
  • Is there a total size restriction for any structures on the lot?
  • Are there any building height restrictions?
  • Is there a County or City Impact fee required to build and if so how much does this cost?
  • Is the property in a flood zone and if so what needs to be done to the lot in order to build?
• Water Meter/ Well
  Check to see if the property has access to water. If the previous owner did not convey this information to you then you will need to check with the counties Department of Water Resource to see if there is water service in the area and if not, you want to find out what the process is to connect to water or drill a well. If a well is required, then you will want to call some well drilling companies that work in the area to get an estimate of the water levels in the area and an ballpark figure of how much it will cost to drill a well.
• Septic/ Sewer
  Check with Planning and Zoning, or the County Health Department to see if the property has Septic or Sewer and if it doesn’t, check to see if there are any restrictions regarding this. If the property is in a metropolitan area, then typically there will be a restrictions as to where a septic can be installed in relation to the other septics and wells on the adjacent lots. If the adjacent lots have their wells all within the minimum distance defined by the county, then the lot may be unbuildable, or a build would need to jump through some hoops to get it installed.
• Electricity/ Gas
  Check with the county Assessor what utility company offers electricity/gas in this area and contact them directly to find out if they have service to that location and what the cost/ process is to connect. You will most likely use this information in your marketing when you go to sell the lot, so it is good to find out this information at this point.

NOTE: If there are no utility companies that serve that area then an off-the-grid solution like solar could be used.

• HOA Restrictions
  If the property is in an area governed by a Home Owners Association, you will want to check with the HOA on their Covenants, Conditions & Restrictions (CC&Rs) to see if anything applies to vacant land or the development of vacant land (in the case that the lot will be marketed as a buildable lot).
• Pictures
  At this point, you want to get an idea of what the property actually looks like, so pull it up on Google Maps (Street view). If you don’t have a good google street view image, consider sending a company like WeGoLook.com out to take pictures of the lot for you. You will use these in your marketing when you go to sell the property anyway, but it is a good idea to view the pictures of the property prior to you closing on the property just incase something weird comes up and you need to renegotiate or back out with the seller. For example, you may discover a trash pile or unrecorded structure on the property that you will need to remove or disclose in your marketing when you go to sell the property. If something like this comes up, you can re-negotiate with the seller based on the extra cost you will incur in order to get the lot in a sellable condition.

For more information on how to research a property in detail please reference the Land Profit Generator home study course.