Contingency Research

When the offer is prepared, various contingencies get put in place. (A good example would be an appraisal contingency if the buyer needs to borrow the money to complete the purchase and the property doesn’t appraise at the contract price, the buyer doesn’t have an obligation to go forward with the purchase.)

Once the offer is accepted, the contingencies period begins. This is the time for the buyer to conduct his or her investigation, obtain all the necessary reports and to ensure the property’s compliance with all the necessary laws and regulations.

General inspector will conduct a general inspection, while specialists might have to be invited to look into more complicated matters, life roofs, foundations, septic tanks, etc. As an investor, your goal is to consider the age of the property, the upgrades that have added value to the property, and the repairs that might be needed in the near future.

In addition to the physical inspection of the property itself, some additional research items would include, but are not limited to:

  • zoning
  • water conservation requirements
  • noise restrictions
  • landscaping and curb appeal restrictions (an example would be white wooden fences required of all the properties in Hidden Hills)
  • recycling requirements, etc.

A knowledgeable real estate attorney will advise you on the inspections that are both required and suggested to get done. Your area might fall under a special permit zone. For example, when developing land in Malibu, the biggest concern are the Coastal Commission permits and Fire Department permits. Since getting the approvals and the permits could take a considerable amount of time, investors hire expeditors to deal with the process. The cost of hiring one ranges between $1,000 and $5,000, depending on the area, and needs to be budgeted into the cost of building in Malibu.

Make sure you do your research before signing those final papers! Litigation is a very costly way of doing business, once the property is officially yours.

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