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Due diligence in a hurry

Posted by Rona Fischman February 19, 2010 02:25 PM

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Markus wrote:

Rona, I think your advice to buyers on due diligence is always good, but frankly, reading it now is kind of a surreal experience. Homes that are selling now go off-market in days or hours. Buyers at most see a house once, sometimes not at all. No one has any idea what setback restrictions are, whether school buses go down the street, whether an addition is legal, or if the town's school system is running out of cash (Arlington). They know nothing about the house they are buying at all, and they don't care.

Many items on Markus's lists are things that a buyer can figure out before making an Offer to Purchase. Even if they are in a hurry-up Sunday afternoon craze.

I encourage buyers to choose a town based on services, density, commuter routes and schools before stepping foot inside any open house. Once a buyer has chosen towns, school districts, and neighborhoods, it is time to start going into houses.
Once in houses, there is a lot of due diligence possible in a fairly short time, even on a Sunday. Walking the neighborhood after an open house should reveal that school bus route Markus would hate so much. Take a walk, you’ll find some of the barking dogs, sloppy neighbors, rutted streets, and changes in neighborhood character (are the houses much bigger or smaller two blocks away?) Talking to a neighbor will help, too, to find out if street cleaning and plowing is efficient in the area, if there is cut-through traffic (there’s that school bus again!) or other lurking noisy problem that won’t show up on a Sunday afternoon.

If a client thinks a house will only work with an addition, I usually tell them not to buy it; they are generally better off starting with a house that fits them. If they want it anyway, the setbacks can be guessed at, with estimates on the high side, based on neighborhood density and my knowledge of the town. Most of the time, I can find the zoning code for the house and the setback limits for the zone on line, even on a Sunday.

Whether or not an addition or repair is legal (and safe) can be discovered and negotiated about after an Offer has been presented; those issues can be addressed within the scope of the home inspection. A home inspector and an attorney have better information on health, safety, and legal requirements than I do. Besides, it doesn’t take someone with my experience to know when an addition is hodge-podge; most buyers react to that without my prompting.

I agree that it is surreal to see a house once and need to make an Offer to Purchase that day. The local market goes in and out of phases where buyers are compelled to make Offers in this manner. A quick decision does not need to be a sloppy decision. Buyers can do some of the work ahead of time, and do more on the spot on a Sunday afternoon. Doing due diligence in a hurry is a hair-raising experience. There is a lot to it, but it can be done.

Are you ready for Sunday? Can you get ready? What else would you be looking for?

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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