| DUE DILIGENCE can make the difference between | | | | projects growth. It identifies county policies and |
| failure and reaching success when it comes to any | | | | priorities. |
| purchase, but especially when buying property for | | | | 8. DETERMINE what is required by your local |
| development. I know you wouldn't do it, but I am often | | | | government entity for your land division. Many counties |
| amazed that some people will purchase acreage with | | | | and cities have the regulations available on the internet. |
| the intention of splitting and making some money | | | | If they do not, call the P&Z that services the area |
| without at least checking on whether the proposed | | | | in which you are interested and ask for a copy. |
| split is feasible or even legal. Never rely on anyone's | | | | 9. FIND more information on flood plains than is listed in |
| say so, even your real estate agent's, that you can | | | | your property profile by pulling up a FEMA map for |
| easily split land and turn a profit. Even if the proposed | | | | your area at The FEMA website will even tell you |
| split is legal, a developer must still determine whether a | | | | whether flood insurance is required by lenders for the |
| state public report will be required prior to lot sales and | | | | stated flood plain. |
| what getting one issued will involve. Always exercise | | | | 10. ALWAYS DETERMINE whether you will need a |
| due diligence before you make your offer; Failing that, | | | | state public report or other disclosure reporting that |
| certainly before you close your deal. | | | | may necessitate additional work and fees beyond |
| 1. START by asking your agent if a state public | | | | your land division project. A general rule is that if your |
| disclosure report is available on the property in | | | | split results in more than 5 lots, you will need a special |
| question. Among others, this is a good reason to use a | | | | public report, but there are other variables such as |
| licensed real estate agent. All licensed real estate | | | | common promotional plans and what you may already |
| professionals are required to receive training on real | | | | own within that common promotional plan area; |
| estate laws and are required to keep up on that | | | | Always determine the rules on this requirement prior to |
| training. In addition, an agent can be considered to have | | | | your purchase by calling your state DRE Development |
| acted in concert when selling property if they knew or | | | | Department. |
| should have known that the sale they closed required | | | | 11. CONTACT an engineer to find out what the |
| a public disclosure report, so an agent has a high | | | | services may cost to accomplish your proposed land |
| motivation to exercise their own due diligence. If you | | | | usage, along with the costs of delivering the items |
| are not using an agent, most states have Department | | | | required for your public report, certifications from the |
| of Real Estate (DRE) websites with subdivision | | | | Department of Environmental Quality, the Department |
| disclosure information available. For further information, | | | | of Water Resources and any local permitting. |
| contact your state DRE office. | | | | 12. FIND OUT what facilities you will be required to |
| 2. ASK your agent for a property profile. A good | | | | install based on the acreage of your proposed split. |
| property profile will include current ownership and their | | | | Many counties, especially rural areas, have lot split |
| mailing address, site address, parcel number, census | | | | requirements for 1-acre parcels or less necessitating |
| tract, housing tract, lot number, legal description, plat | | | | some or all of the following:a. Private maintained |
| map, property characteristics, including acreage and | | | | roadway passable by a 2-wheel drive vehicle.b. Public |
| latitude and longitude, the last transfer date with | | | | maintained roadway (Primary or Tertiary maintenance |
| document recording number, assessment and tax | | | | passable by 2-wd vehicle).c. Access to electric service |
| information, transaction history, detailed sales | | | | or agreement w/ utility company to extend service at |
| comparables, nearby properties, demographics, public | | | | your cost.d. Within a fire district.e. Direct access to |
| schools, private schools, plat map, flood zone and | | | | water service pipelines operated by a water |
| crime statistics. If you are not using an agent, there are | | | | company.f. Adjacent to a paved through road |
| many free services found on the World Wide Web | | | | (collector, arterial) serving the area.g. Direct access to |
| such as Zillow where you can look up property | | | | paved road.h. Direct access to public sewer. |
| information yourself. | | | | 13. FIND OUT ahead of time if your lender will offer |
| 3. Ask your agent to give you a copy of the deed and | | | | partial release provisions for your deed of trust when |
| any previously recorded Covenants, Conditions and | | | | you begin financing for your improvements. Once you |
| Restrictions (CC&Rs). You don't have to wait for | | | | begin your sales out of your new subdivision you must |
| the contract to be written, the property is in escrow | | | | ensure that each new purchaser will receive his lot |
| and a title search is done to check out these | | | | free and clear of any blanket encumbrance. |
| documents. If you are only buying a portion of an | | | | 14. IDENTIFY the current builders involved in the |
| existing subdivision, the existing CC&Rs will be | | | | surrounding areas and find out what the lots and |
| important for you to check out prior to purchasing. If | | | | dwellings are selling for and how fast they are moving. |
| you are developing your own subdivision, you will | | | | Check the re-sale value in the immediate area |
| probably be declaring and recording your own | | | | because this helps determine the sale prices of new |
| CC&Rs. | | | | construction in the neighborhood. After all, once you |
| 4. AFTER you have received your property profile, go | | | | develop your property you want to sell it at a profit |
| to the property and walk the entire site to determine | | | | These 14 steps should be the minimum of your due |
| its suitability for what you want to accomplish. While it | | | | diligence investigation and merely represent the key |
| is no substitute for being there, many counties now | | | | issues that should be addressed prior to investing in |
| have public GIS mapping systems that will bring up the | | | | development property. The principal reason for due |
| parcel in question in high resolution orthophotography | | | | diligence prior to buying and developing land is to |
| and give you street names, whether roads are county | | | | determine if the land development would be |
| maintained, show railroads and give recorded | | | | economically sensible. You can go beyond the |
| dimensions. | | | | above-listed steps and search records for pending |
| 5. FIND OUT about the infrastructure--What is in place, | | | | divorce, bankruptcy or other life changing events that |
| are they adjacent or how many feet are they to your | | | | could affect the amount you want to bid or offer on |
| farthest proposed lot, can the facilities be extended | | | | the property. A pending divorce could mean the |
| and what the costs would be to extend to your | | | | principals might be willing to accept less. |
| proposed project. Take measurements from the | | | | Public disclosure reports are meant to protect the |
| farthest lot in question to each facility such as electric, | | | | public. Among numerous disclosures in a state public |
| telephone, cable, sewer and gas. Then contact the | | | | report are facilities providers, potential hazards and |
| utility companies and find out what the process and | | | | problems in the area, schools, transportation, hospitals |
| fees are to extend service that distance. If you do not | | | | and stores. Property profiles used to only be available |
| know the local utility companies for that area, pull out | | | | through real estate agents and title companies but |
| the local telephone book or contact the local Chamber | | | | much of this information is now freely available on the |
| of Commerce for a list. | | | | internet. Google "property profile" and you will get |
| 6. NEXT, call the local City or County Planning & | | | | numerous hits on where to find this free information. If |
| Zoning (P&Z) Department and check on zoning or | | | | you cannot find a county website where you can find |
| rezoning potential. P&Z will have a Development | | | | public recorded documents, call your county recorder |
| Services Department as well, although it may be called | | | | and request copies. Once you have gathered all of |
| another name. Ask to speak to the director about your | | | | your information and made the educated decision to |
| proposal so they can tell you whether this fits in with | | | | purchase your property, make sure you call P&Z |
| the General Plan. | | | | to make an appointment for you and your engineer to |
| 7. ASK for a copy of the General Plan and the Area | | | | review your plans for developing. Each area has its |
| Plan for your project locale. Besides a community | | | | own subdivision and development regulations and most |
| history, a Master Plan tracks development trends and | | | | are available online. |