Here’s the second episode of our focus on due diligence. Hey, thanks for checking out the Real Estate Today podcast.
I’m Bob Nelson, real estate investment broker with Pacwest Real Estate Investments. And I’m Marcia Edwards, residential broker with Windermere Real Estate.
Marcia Edwards: We’ve been talking about the due diligence period. And just to step back and say what is due diligence in the typical real estate transaction, very different needs depending on what you’re purchasing, but basically once the buyer and seller have agreed to terms, the buyer has an opportunity to understand what they’re purchasing. They get to go deep and in detail to understand what the property condition is so they know what as-is is, but also the condition of title and opportunities attached or liabilities attached to that property.
Bob Nelson: And it’s an interesting process. You have to have your ducks exactly in a row before you start in to this process, know exactly what you’re going to need to research, know exactly where to go to get the information in order to do your research, and then do it very quickly, but not so quickly that you miss something. Now there’s an interesting thing, because I had mentioned in a former program, I’m typically given 21 days to do the due diligence on income-producing properties. And it’s a tough situation. I have to make sure the property is sound. I have to make sure that the income stream is sound, which means the leases. And I have to make sure it’s environmentally sound, that there are no contaminations from offsite sources or prior onsite sources, which means I have to have a Phase One Environmental. That takes a while. And that’s within 21 days. Ooh, boy.
Marcia Edwards: So this is what isn’t published in regards to the role of a realtor. And I think Bob’s an excellent example of this. He knows exactly when he looks at a property, the little gears start turning about what experts need to be onsite in the timeframe.
Bob Nelson: I have to.
Marcia Edwards: He has a relationship with those folks and he has the ability to assess the leases in a way with a mind toward those to your benefit and your defense. So that’s not really in the marketing of realtors, but that is so critical in the due diligence period.
Bob Nelson: It really is. And typically if a property is listed by a broker that is not particularly familiar with that product type, they do not know how to represent it properly and so I’m really guarded at that point. I like to deal with very experienced brokers. It makes the best transaction, the safest transaction for our clients.
Marcia Edwards: But what a consumer can do is get their advocate next to them regardless of who’s on the other side. So if you get Bob next to them, he’s going to know what we need to call on for more information based on even the skimpiest portfolio at the initial understanding of the property.
Bob Nelson: Well, and if you make a mistake it can be really costly. You’re anticipating it’s going to go up in value a certain amount and all of a sudden you’re putting money into the property trying to cure a former problem. It’s a tough deal.
Marcia Edwards: Let’s just call Bob. I’m Marcia Edwards, Windermere Real Estate.
Bob Nelson: And I’m Bob Nelson, real estate investment broker with Pacwest Real Estate Investments.
Join Bob Nelson and Marcia Edwards Eugene, Oregon, real estate experts daily at 5:30 on KPNW for the “Real Estate Today ” radio show.