4 Independent Third Party Reports To Review Before Making A Move On Properties

By on June 1, 2014

A huge portion of the cumbersome tasks for due diligence can be conducted by you. But since you have a vested interest in your investments, your opinions and review can be biased towards the decision you want to make. To avoid the mistake of vanity which can throw you off any pedestal you are standing on, it is wise to get independent third parties involved to present you with their professional opinions.

There could be dozens of third parties with their own areas of expertise regarding real estate. Thankfully, there are only 4 that are most critical to your investment.

Property condition

A report that looks into the property condition where inspectors will list down all the issue. It will highlight urgent issues as well as those that are close to being negligible. The overall objective is to help you become aware of overall condition of the house as well as details on specific areas that can turn out to be big problems in future. It will then be up to you to decide on the course of action to take. A good inspection team should also include the estimated remaining lifespan of fixtures so that you can plan out your budget accordingly.

Even though the hallmark of any successful business person is to control any amount of costs, a property condition report is hardly an item which you should cut corners with. Reputable inspectors will also have an easier time getting their work recognized by your lender. You won’t know what that alone is worth until you run into one that lenders no not recognize.

And since third party independent reports are supposed to be unbiased toward any party, they can be a useful foundation for how price negotiations with buyers or sellers are approached. An unbiased report that is advantageous to you can potentially be your trump card if you play it right.

Appraisal

For players who are steps ahead of the beginner and intermediate investors, they might sometimes feel that an appraisal is not necessary. One key reason is that they finance their projects through private equity, cash, or even barter trades. But if you have yet to reach that level of game, you should definitely get an appraisal done. Your bank will require it anyway when working out loan quantum you can be approved for.

You might think you know the local market more than any professional can ever comprehend. And you might be right. But the truth is that you are dealing with the market, not with yourself. So you need an unbiased third party to inform you how the market values the property in question. If you have to call in the appraiser only because of the bank’s request, they will arrange it for you as they have their own appointed panel of appraisers working in partnership with them. If you have your own preference on hiring, make sure you propose it to your lender beforehand.

Environmental

This is something that new investors often fail to notice until they are called in by the lender to conduct an investigation Soil contamination is hardly something that we pay attention to when our minds are fixated on the monthly cash flow that a house can generate. It would be thrown further back behind our minds when there are already tenants living in the place without any problems whatsoever. Specifically, you are getting a Phase 1 report. If everything turns out fine, you will have at least bought a peace of mind.

Market report

A comprehensive market study can be essential if you are taking up a unique project or one that has not been tested in the area before. We are not talking about those reports that an aggregator can churn out in 20 seconds. Those types of reports basically just give you data without giving an opinion. Hiring them is like asking a question about gardening and they send you a book on horticulture leaving you to form your own conclusions. If you hire a lawyer on property issues, would you expect him to just send you a copy of the real estate regulations?

The type of market study you are interested in are those that are conducted by professional real estate research agencies. They conduct studies on demographics, regional as well as national trends, real estate cycles, etc. They will present these information to you in their reports and give recommendations based on the facts they have uncovered. However, remember to make your own conclusions instead of taking them on their words.



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