Why Due Diligence Is Important for a Seller –
Sellers strengthen their negotiating power … by identifying problems in advance.
If you’re selling a property, you need to do your due diligence. It not only protects you from the unexpected, but the information might help you sway a potential buyer.
A seller who knows every detail about a property can influence a buyer’s perception of the value. Following are four areas you should check before you list a property for sale:
- Environmental Investigation of Your Property: Regular monitoring should be considered, as it serves as proof that the area is free of harmful contaminants.
- Deed, Survey and Legal Description: Ensuring that the deed is, in fact, in your name ahead of time will save a great deal of time, money and headaches. There are two common reasons why the name(s) on the deed could affect the completion of a sale. Fraud is one example and involves the changing of the ownership on the deed without the proper owner even being aware. Partnerships and incorporation agreements can further complicate the sale of a property. Legal representation may be required in order to distinguish signing authority in these instances. An accurate and updated survey clearly outlines the boundaries of the property and identifies any boundary violations affecting the property. Your fence may, in fact, be on the neighbor’s property or vice versa. Identifying discrepancies like this in advance will save you both time and money come closing.
- Easements and Rights-of-Way: Easements vary from minor utility easements to major encroachments. A minor utility easement occurs when the utility lines (phone, electricity, water or sewer) run above your property. Gas, water and sewer lines, and utility wires in newer neighborhoods, are underground. This creates a more in-depth easement, as the utility company reserves the right to dig up the lines for repair and/or replacement and, thus has the right to place restrictive covenants on the property.
- Restrictions and Covenants Connected to the Property: Restrictive covenants affect the value of the property by placing restrictions on a buyer. There may be zoning restrictions that limit the property’s development potential. Another type of restriction that could affect the development potential is imposed by utility companies. They reserve the right to access the property and even dig up sections for the repair and replacement of the lines. This would prevent the property owner from adding structures such as garages, sheds or even fences that could hinder the utility company’s access. A buyer who discovers this during his or her own due diligence period is likely to request a discount on the purchase price.
Sellers strengthen their negotiating power, and save time and money, by identifying problems in advance. When they complete their due diligence, this allows sellers to avoid costly mistakes and delays as they complete the sale of their property.