Number, size, or type of pets (if any are allowed)3 Purchasing Land, a Home, or a Condominium
When buying land or a home, you want to make sure that you don’t encounter unpleasant surprises—such as zoning laws that won’t let you build the house you envision. (If you have already bought land, a home, or a condominium, you can jump ahead to Chapter 4.)
Due diligence is the research and analysis of a piece of property or condominium done by the prospective buyer along with his or her realtor before a final decision is made about buying. The property is usually under contract during the due diligence process, with the buyer and seller agreeing to a specified amount of time for the due diligence. The prospective buyer may ask for additional time if needed, but if the seller has another interested party that extension may not be granted. At the end of the due diligence period, the prospective buyer can go forward with the purchase or terminate the contract.
Performing due diligence when buying raw land to build a home, a tear-down to build a home, a home to remodel, or a condominium is a way to find out if you will be able to create your vision on this property. Important information to obtain during due diligence includes the Homeowner Association covenants and bylaws, and municipal codes and zoning laws that would restrict what you want to build or remodel. During due diligence, you could discover the home is on the historic registry and cannot be torn down. Other things that might be uncovered are nuisances such as a volatile neighbor, neighbor pet issues, or an odor that appears when the wind blows from a certain direction.
You can ask that the seller identify the setbacks from the property line that identify the building envelope, the area in which your house could be built. Depending on the motivation of the seller or the housing market, the seller may or may not be willing to have this done. The potential buyer may have to pay to have this done.
(If you already own the property you can hire a surveyor to identify the building envelope and setbacks based on the municipal codes and HOA. You may also measure these yourself.)
DUE DILIGENCE INFORMATION
FACT SHEET
As you gather information, fill in the Due Diligence Information Fact Sheet (page 60) and file it in Binder 3. This fact sheet contains the address of the property under consideration, the seller’s realtor’s name, the seller’s name, the most pertinent answers to the due diligence questions, a list of your concerns, and any follow-up questions.
HOMEOWNER ASSOCIATION
INFORMATION FACT SHEET
Fill in the Homeowner Association Information Fact Sheet (page 61) and file it in Binder 3. This fact sheet contains the name, address, and contact information of the HOA, the board members’ names and contact information, the name and contact information of the architectural review committee, any pertinent HOA information discovered, and any follow-up questions for the HOA.
MUNICIPALITY INFORMATION
FACT SHEET
Fill in the Municipality Information Fact Sheet (page 62) and file it in Binder 3. This fact sheet should contain the names, addresses, and contact information of the Director of the Codes Department, the Zoning Department, the Building Permit Department, and any other departments that will be involved in granting a building permit and a Use and Occupancy Certificate. List any pertinent information you receive from these departments during your due diligence process. Also list any questions and follow-up needed from the municipality.
DUE DILIGENCE BEFORE
BUYING RAW LAND OR A HOME
Compile a list of questions with your realtor to be given to the seller’s realtor. An experienced realtor who knows the area will aid you in reviewing the questions and adding to the list. It is important to request that these questions be answered in writing and signed by the seller. They should become a part of the contract. Include a date you would like for the answers to be returned. File a copy of your questions and the answers obtained from the seller in Binder 3.
QUESTIONS TO ASK THE SELLER
1. Why is this property being sold?
2. Are soil test results, surveys, or architectural plans available? If so, will these be provided?
3. Are there current property line markers on the property? If not, can a survey be done and the property line marked?
4. Explain the availability of gas, electricity, water and sewer, cable television, internet services, and telephone. Are all available? Will there be any fees to bring these services to the lot?
5. Are there any utility boxes on the property or, if a new development, where will they be located?
6. Are there any unsightly utility poles on the property? If so, are there any plans for underground utilities? Do you have the option to pay to move the utility wires underground?
7. Are there any utility easements? Explain.
8. Is there any possibility of a major power line planned for the neighborhood?
9. Are there any pipelines running through the property? If so, are they properly marked on the property?
10. Explain any rights of way running through the property.
11. Are there any mineral rights that go with the property?
12. Explain any restrictive covenants.
13. Explain any deed restrictions.
14. Are there any known water sources running under or through the property, such as springs, creeks, and so on? Describe.
15. Is the property in a flood plain?
16. Does the property require flood insurance?
17. Is there a public transportation route near the property?
18. What school system serves the property?
19. What fire and police force serves the property?
20. How close is a fire station to the property?
21. Is there a fire hydrant near the property?
22. Are there any new developments planned in the area that would affect the value of this property positively or negatively? Explain.
23. Are there any proposed zoning changes we should be made aware of? Explain.
24. Are there plans for a new school or other government building that through eminent domain could affect the property?
25. Are there plans for new roads or interstate highways planned or being considered for the neighborhood? Explain.
26. If applicable, please provide a copy of the Homeowner Association bylaws and covenants.
27. How much are the HOA dues and how often are they paid?
28. If applicable, are there any homeowner assessments planned? Please provide the history of homeowner assessments for the past ten years.
29. If applicable, does the Homeowner Association have plans to raise the monthly, quarterly, or annual dues for common areas?
TIP: If you are purchasing land
that has previously been used for
growing fruits or vegetables, have
a pesticide test done on the soil.
30. What is the process required by the Homeowner Association to receive approval to build?
31. What is required by the city or county to obtain a building permit?
committees or approval process for tear-downs?
33. How much is the property tax?
34. How much do monthly utilities (water, electric, and gas) cost?
35. Are there any odor problems? If so, explain what kinds and suggested treatments.
36. Has there been a meth lab, murder, suicide, or any other event that would affect the property value?
37. What is the crime rate in this area?
38. Have there been any incidents with neighbors such as domestic violence, abnormal behavior, or disturbances? Have the police ever been called?
39. Have there been any nuisances or incidents with neighbor’s pets? Do any pit bulls or other dangerous dogs live in the neighborhood?
40. Is this piece of property affected by the noise of trains, planes, or automobiles?
SITE VISITS: ISSUES TO ADDRESS
When you meet architects and builders at a property you are considering for purchase, there are many issues to address. The list here includes examples of questions to discuss and features of the property to check. Use this list as a guide to come up with your own list of issues. (If you have already purchased property, your list can help you determine how to position your home on the property.) Bring your list to the site and be sure to take detailed notes.
Place a copy of your list and your notes in Binder 3 behind the Due Diligence Questions and Answers tab. File any information about the design of the home in Binder 4.
Examples of HOA Bylaws
and Municipal Codes
The building fees and penalties assessed by some homeowner associations can be substantial. It will help to have a clear understanding of all fees and penalties. Some HOA bylaws have a time frame for new construction to be completed. If not completed, you will be fined each day until completion.
Many homeowner associations require payment to begin the architectural review process and have an architect on retainer giving input. Some homeowner associations assess fees for approval to build. These fees are for street wear and tear and other expenses incurred during the construction process.
The following are examples of HOA bylaws and municipal codes from various parts of the country. Some are more stringent than others. It is important to understand what bylaws and codes might affect the vision you plan for your home.
No freestanding structures. All structures on
the property must be connected.
Setbacks from property lines may be substantial.
Height restrictions.
Maximum and minimum number of square
feet for a house.
Maximum number of square feet for a garage.
Number of balcony square feet.
Maximum amount of heated sidewalks.
Maximum amount of paving/concrete for
a driveway.
Maximum degree of mountain slope on which
a home can be built.
Stringent rules regarding tear-downs and
recycling materials.
Color of materials to be used on the exterior
of the house.
Restrictions on materials that can be used
on the exterior of the house.
Roofing materials must be approved.
Architectural design must be approved.
Maximum amount of glass windows that
can be used.
Noise restrictions such as not allowing
exterior speakers.
Restrictions on height of fences
Exterior lighting restrictions such as not allowing
flood lights on the house.
Swimming pool cannot be seen from neighbor’s
homes sitting above your home.
Environmental laws that must be met.
Wildfire, wildlife, avalanche reports must be
submitted.
Any tree removal or replacement must
be approved, even dead trees.
No dirt work can be done for landscape or any
other purpose without HOA approval.
Strict guidelines for construction worker parking.
Start and stop times and days of the week
for building.
1. What part of the property receives the western sun? How does this affect the positioning of the house on the lot?
2. Which part of the property faces north? (Snow will pile up on that side of the house and cold air will blow from that direction.)
3. Will any windows line up with the next door neighbor’s windows?
4. What will the view be from each window of the house?
5. Climb on a ladder to see the view from the second level.
6. Walk the property line and see what actually borders the land.
7. Identify the height restrictions at the property site.
TIP: Before you visit raw land or a
tear-down with your architect and
builder during the due diligence
period, obtain the setbacks and height
restrictions so that the architect can show
you how those affect the property. Make
sure your realtor has requested that the
property line be clearly marked. Obtain a
survey of the land and a survey showing
all structures on the property. Take a
tape measure and, if possible, a tall
ladder to help you see the view from
upper levels. If you have a style or shape
of house in mind, your architect can
help you determine if the property
can accommodate that style or shape.
8. Where will the driveway enter from the street? Which side of the property would be best for the driveway and why? If you live in a frigid climate, will the location of the driveway receive direct sun to melt the snow and ice?
9. Would there be a blind spot when entering or exiting the driveway? What is the traffic pattern during rush hours? Is there room for a gated entry to the driveway?
10. Discuss any trees or shrubs you want to save.
11. Listen for traffic noise and note what side of the house would be closest to the noise.
12. Will there be parking issues in front of the property if there is a nearby school or public venue?
13. Are there any telephone or power poles on the property? Will they be an eyesore? Will they interfere with radio transmissions?
14. Are there any drainage issues to consider when positioning the house on the lot?
15. Visit the property during a heavy rain and note how the water drains. Will this affect where you position the home?
16. Is there a storm drain at the property? Note the amount of water flowing into it during a storm.
17. Are there any pipeline markers on the property? These could affect where you position your home.
TIP: If building where the HOA
has an architectural review committee,
have your preliminary architecture
plans approved before you
spend the time and money to do
a complete set of plans that may
end up being rejected. Sometimes
HOA architectural review committees
can be very demanding.
18. Are there any utility boxes on the property? Will these be an eyesore?
19. Does your cell phone work on the property?
20. Can you get cable television? If not, is the site suitable for a satellite dish?
21. Is high-speed internet available?
22. Are there any rights of way through the property that would have an adverse effect on where you position the house?
23. How is garbage pickup handled on the property?
24. What city or county building codes will affect the property or the home you wish to have built?
DUE DILIGENCE BEFORE
BUYING A CONDOMINIUM
If you are considering buying an existing condominium, one under construction, or one that will soon be built, ask the following questions during the due diligence process. After reviewing this list with your realtor, compile a final list of questions for the seller or developer. It is important to get the answers in writing and make those answers a part of the contract should you buy the condominium.
True Stories of Condominium Woes
There are many pitfalls to watch out for when you buy a condominium. For example, if a unit has had water damage accompanied by an insurance claim, a new homeowner may be denied insurance coverage. This happened in the late 1990s when mold was the lawsuit du jour. A prospective buyer waited until the day of closing to inquire about insurance and was turned down due to a water damage claim from a few years earlier. The claim was due to a faulty toilet and no mold was involved. Even so, she was denied coverage. The prospective homeowner closed on the unit without insurance with plans of contacting another company for an insurance policy.
In another situation, the police were called numerous times for domestic disturbances involving a resident with alleged mental and drug problems. This resident entered another resident’s unlocked condominium on the same floor without permission and used the shower; burned food while cooking, causing residents in the building to call the front desk to ask if there was a fire; and drove off in someone else’s car that the valet had brought up from the garage! Two years later, the board was still dealing with this condominium owner.
In another condominium, the service elevator vestibule, a small room outside the service elevator on each floor, was smaller than the actual service elevator. The door leading out of the service elevator vestibule required a 90-degree left turn from the service elevator. When a moving company tried to move furniture from the service elevator into the elevator vestibule, it would not fit. One long sideboard could not make the 90-degree turn. The homeowner ended up paying the movers to carry the very heavy piece up the fire stairwell ten floors.
The design for one penthouse remodeling job called for tall panels of mirror on certain walls. The homeowner had to use a helicopter to lower the sections of mirror into the penthouse because they were too large to fit in the elevator.
Another building did not provide any service elevators to its hundred-plus units, even though the marketing material stated there would be one. Service elevators are typically used for moving in and out, remodeling or any construction within the resident units, repairmen and housekeepers, taking pets in and out of the building, and delivering large purchases. With only one service elevator and several construction projects going on, jobs were delayed, not to mention residents inconvenienced.
The opening to the trash chute in one building was so small that a super-sized laundry detergent bottle or a pizza box would not fit through it. Residents had to take the elevator down to the dumpster to throw out any trash that did not fit in the chute.
The bylaws of one Homeowner Association in a high-rise would not allow any type of Christmas decorations on the balconies. The same bylaws also stated curtains or curtain lining had to be a white or cream color.
In one high-rise building that presold numerous units before breaking ground, buyers were allowed to make changes to the architectural plans. All changes would be made by the construction company hired to build the building. Once construction got underway, the buyers learned that neither they nor their interior designer would be allowed to enter the building until they closed on the unit , so they could not oversee the remodel job. When the buyers saw the final product at closing, to their dismay, they discovered many mistakes and misinterpretations of the design plans.
File the questions and pertinent answers in Binder 3. File any answers returned in writing in Binder 8.
QUESTIONS TO ASK THE SELLER BEFORE
BUYING A CONDOMINIUM
1. How many parking spots come with the unit? Is there tandem parking? Is parking additional to the sales price? How is the location of the parking spot determined? How close is it to the elevator? Ask to see the actual parking spots. Is it deeded to the condo owner? Is there property tax on the parking space? Is the spot near a column that prevents a driver from fully opening the door? Is it near a maintenance area and does the vehicle need to be moved occasionally? Is there a monthly fee for parking garage cleaning, security, and upkeep in addition to the condominium fees? Are the residents allowed to park their own vehicle or is a valet required to park all vehicles?
2. Do storage units come with the building? Are they deeded? Where is the storage unit to the residence located?
3. Is there a drain at the bottom level of the multilevel underground parking garage? (This is desirable to allow water to drain out of the garage when it is power washed.)
4. Does each condominium have its own HVAC control or does the building superintendent control the temperature?
5. If the building superintendent controls the HVAC, what are the temperature settings?
6. Is the output for air conditioning adequate for comfort?
7. Does the unit get so much western sun that the curtains need to be drawn every afternoon? Does the western sun heat up the condo? Has the sun faded furniture, rugs, or wood floors?
8. Is this unit near the trash chute? Is there noise froom trash going down the chute or from the trash chute door opening and closeng? How many trash chutes are located per floor? What is the location relative to the unit? How large is the actual opening to the trash chute? (Some are so small you cannot fit a pizza box or large detergent jug into them.)
9. Is there pickup for recycling? If so, where is it, and how often is it picked up?
10. Is this unit located near an alley? If so, is there noise from dumpsters?
11. Is this unit on a bus route? If so, is there noise from buses early in the morning or late at night?
12. Is this unit near an elevator? Are there noises from the ding of the door opening, the sound of occupants talking, or the sound of it going up and down?
13. Is this unit on a busy street? (A one-way street that approaches a stop sign will be quieter because drivers will be taking their foot off the gas pedal in preparation to stop. If the unit faces a one-way street just beyond a stop sign, cars pulling away from the stop sign will be giving the vehicle gas to pick up speed, which is noisier.)
14. Are pets allowed? Is there a limit on the number of pets per residence? What are the pet rules and regulations?
15. Do any of the neighbors have pets? If so, have these pets created any problems such as barking?
16. Is there any litigation pending with the construction company? If so, explain.
17. Is any litigation pending with the Homeowner Association? If so, explain.
18. Please provide bylaws, covenants, and any other pertinent Homeowner Association information.
19. How much are the Homeowner Association dues? Are these paid monthly, quarterly, biannually, or annually? How many increases have occurred in the past ten years? When is the next increase expected? (Ask to see the HOA budget.)
20. Please provide copies of the board meeting minutes for the past year.
21. Have the homeowners ever been assessed by the HOA? If so, how much was the assessment and what was the reason? Are any planned?
22. Are there any HOA rules governing curtains on the windows? Christmas decorations? Balcony objects? Stereo speakers on the balcony?
23. Have there been any termite problems or damage due to termites? If so, what was the damage and how was the problem treated?
24. Have there been any repairs for water leaks or damage due to the water leaks in this unit? Has there been an insurance claim? If so, explain.
25. Has there ever been any mold in the unit? Has there been an insurance claim regarding mold? Explain both.
26. Have there been problems with neighbors living on the same floor, above, or below? (Things that you should be concerned with may include people with alcohol issues, domestic violence problems, noisy neighbors, or any other problems that have involved police.)
27. Has the building had a structural, mechanical, electrical, plumbing, or other audit done? If so, why? Is there a report from this audit on file?
28. Please provide a copy of the certificate of occupancy or use and occupancy certificate.
29. Has the developer’s master plan met all code requirements and been signed off on as compliant by the codes division?
30. How is furniture moved into the unit? Is there adequate space to load and unload furniture in the elevator vestibules? How many service elevators are there? Is a reservation required for the elevator on moving day?
Will large furniture fit into the elevator or in the elevator vestibules? (Armoires, large art and mirrors, pianos, oversized sofas, and hunting trophies can be problematic.)
31. Describe the fire drill. Will fire ladders reach the height of the unit?
32. What is the fire escape plan?
33. Identify any load-bearing walls. (You need this information if you plan to remodel.)
34. How much is the property tax?
35. What do the HOA bylaws say about remodeling?
36. What type of security system does the building offer?
37. Does the building have security personnel on duty? Are they armed? Are they on duty 24/7?
38. Does the building require employees to sign a confidentiality agreement?
ADDITIONAL QUESTIONS FOR
NEW CONDOMINIUMS
If you are purchasing a mid-rise or high-rise condominium that is either under construction or will be built in the near future, there are questions to ask specific to a new development during the due diligence process. Use the following list of questions and discuss each point with your realtor when you visit a condominium that you are interested in buying. Your realtor may have additional questions to add to the list. File pertinent information in Binder 3. Add any answers that relate to design to Binder 4. Always get any promises made by the developer in writing as part of your contract.
1. Will you be able to make buyer changes?
2. Will you be granted reasonable access during construction to oversee the buyer changes?
3. Will you be allowed to bring in your own plumber to check plumbing before drywall is installed? High-rise condos are known for having plumbing leaks. Ask to have your own plumber check the work that has been done. If you know your neighbors, especially the person above you, encourage them to have their plumbing checked, too.
4. If you are one of the first to close on the unit and the full support staff has not been hired and some of the amenities are not ready for use, will you be expected to pay the full amount of common area dues?
5. At what point does the developer begin paying the common area dues for unsold units?
6. How long will the developer be allowed to post marketing or For Sale signs on the property?
7. What are the specifications of materials that will be used in the finish-out? Make the specifications and tear sheets for these items part of the contract. These include the floors, counters, lighting fixtures, appliances, fireplace mantel, type of fireplace, type of gas logs, photo of proposed fireplace and logs, plumbing fixtures and fittings, ceiling fan photos, balcony railing, balcony flooring, closets, cabinets, and so on.
8. What comes with the property? Get it in writing. Will there be a lawn sprinkler system, sodded grass installed, water fountain, pool, hot tub, weight room and equipment, furnishings in the common areas, wine storage area, or garage storage? How many passenger elevators and service elevators will there be? What services will the staff provide and what type of security system will there be? What types of trees and shrubs will be planted and how many? Some developers verbally promise many amenities but end up not providing them—so get it in writing.
9. What are the proposed HOA monthly dues? Ask how this figure was reached. Ask for a guarantee on how long the monthly dues will remain at the price quoted when the unit was purchased. Sometimes monthly fees are set too low for selling purposes and are increased within a short period of time.
Check Out Condo HOA Bylaws
Condominium HOA bylaws can affect the lifestyle you envision due to restrictions on remodeling, restrictions on the use of your condominium, and restrictions on the number of occupants.
Bylaws may place restrictions on
Number, size, or type of pets (if any are allowed)
Number of household occupants allowed in your unit
Use of your condominium for any type of business
Swimming pool use
Use of Christmas lights or decorations on balconies
Window treatments
All objects placed on a balcony, including the weight and the aesthetics
Use of the party room
Hosting parties or social events in your condo. (Some HOAs even require you to provide a security officer and valet parking if you have more than a set number of guests.)
Hosting Tupperware, jewelry shows, clothing shows, or other type of retail parties
Days of the week and hours of the day construction workers can work in your unit
Leasing your unit
Grilling on your patio or balcony
File in Binder 3:
Due Diligenc
Due Diligence Information Fact Sheet
Seller’s name __________________________________________________ Phone _____________________________________
Property address _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
Seller’s realtor _________________________________________________ Phone _____________________________________
Buyer’s realtor _________________________________________________ Phone _____________________________________
Pertinent information architect needs regarding property that was discovered during due diligence _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
File in Binder 3:
Due Diligence
Homeowner Association Information Fact Sheet
Name of Homeowner Association _____________________________________________________________________________
Phone ________________________________________________ Fax ________________________________________________
Mailing address _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
HOA president _________________________________________ Phone _____________________________________________
HOA e-mail ________________________________________ President e-mail _________________________________________
Board members and contact numbers _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
HOA fees for building approval _______________________________________________________________________________
HOA architectural approval process pertinent facts _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
HOA design criteria information _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
File in Binder 3:
Due Diligence
Municipality Information Fact Sheet
City or county name ________________________________________________________________________________________
Contact names, contact numbers, fax, e-mail _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
Address _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
Building permit fee information _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
Building permit approval process _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
Codes and zoning design criteria information _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________ _________________________________________________________________________________________________________