For Your Clients: Don’t Sign That Line Without This Important Step

By H. E. James

Before your client signs that dotted line, there’s a step in the due diligence process that often gets neglected -- at least until something goes wrong with that brand new purchase: records research. In eight years running a municipal records center, I saw even the most seasoned REALTORS®, homebuyers and real estate brokers neglect a visit to my office before signing contracts. A records search can find any number of red flags on a property that could either hinder a sale or should have warned a REALTOR® or buyer off a property altogether.

There’s a Problem?

Due diligence often includes finding copies of CC&Rs, asking about the latest system updates, or helping file necessary paperwork for tax purposes. It should also include figuring out things like zoning designations and permitting histories for homes. Homes are often put up for sale with expired or voided permits, and depending on the jurisdiction, the next homeowner could be liable for finishing these permits. I saw many a new homeowner come to the records center in a panic, realizing that finalizing the score of permits would be prohibitive after closing costs, taxes, etc.

Another potential sticking point could arise if you’re working with a business owner who is looking for a new place to lay his head and hang his business sign. Home occupation permits are strictly regulated in many jurisdictions and zoning must be researched thoroughly. A welder cannot legally set up shop in the middle of a densely-populated neighborhood; however, there may be a Planned Unit Development that allows this type of business in its CC&Rs.

What if your client’s dream home is a fixer-upper in one of the oldest neighborhoods in the city? She might be inclined to sign that contract quickly so she can get started turning that fixer-upper into her dream home, but the neighborhood could be designated as historic. If she finds this out after signing the contract, she’s looking at a restoration, not a remodel.

How These Problems are Prevented

Start with GIS mapping systems. This was always my starting point when conducting research for my customers, and they are a great way to check a number of points in order to avoid future problems for your clients. In order to check if a home is in a historic district, check the zoning layer. No one wants a fixer-upper to turn into a money pit because of restrictions on building materials.

GIS mapping systems will also help you if you’re working with a client with a home-based business. Some home-based businesses don’t require a physical address, but if your client’s business does, there are a few things to consider when researching potential properties. HOAs may restrict business ownership in neighborhoods, and zoning ordinances may even make it illegal for certain businesses to occupy homes. However, encouraging a client to buy a home, start a business, and use a P.O. Box as a business address may also be illegal.

Layers in a GIS system may be available showing you the permitting history for a piece of property as well. One existed in the jurisdiction in which I worked, and it contained all the building and P&Z permits for the history of a property’s inclusion in our perimeter. If a permit was available online, there was a hyperlink to that database.

The permit database is the next place to look in order to mitigate any issues a homebuyer might experience after signing a contract. The bigger a jurisdiction, the more likely it is to have its permit database available online. Here’s where you and your client can check the statuses of permits that have been issued on a home and dig into whether or not it’s feasible for the client to finish work started by someone else. You may be able to view floor plans for any work done or for work that was scheduled, but never completed. If the work is too extensive, you and your client may want to move on to a different home.

Perhaps your client is picky about location, location, location. In tandem with a GIS map search, you can check for developments in the surrounding area. Not all new homeowners can tolerate the sounds of construction in the nearby subdivision.

When in doubt about what’s going on with a piece of property a client wants to purchase, check in with your nearest municipal records manager. Giving someone like me a call takes just a few minutes out of even the most seasoned real estate vet’s life, but it can save a client a lot of money after signing a contract.

Hattie James is a writer and researcher living in Boise, Idaho.  She has a varied background, including education and sports journalism.  She is a former electronic content manager and analyst for a government agency.  She recently completed her MBA and enjoys local ciders.  Find her on Twitter and LinkedIn.