Home Purchase Checklist

[Brandon Duensing]

So I am finally venturing into home rehab and re-sell this year, besides the obvious financial analysis (ROI, ARV, rehab costs etc.) what are a good list of "unexpected" issues to be aware of to improve my due diligence?

- Liens, permitting issues, zoning issues, titling issues, etc? I am trying to create a deal workflow process to help minimize getting caught with unexpected timeline or costing issues. 

[Dave Van Horn]

@Brandon Duensing

Sure thing. We have a 'Red Flag' list at my company when we buy. Hope it can give you some ideas.

Keep in mind it's not relevant for every single type of house and some aren't complete "red flags" rather just something to evaluate, but this is pretty much the soup to nuts version:

Title:

• Utility liens
• HOA's
• Taxes or Sales
• Notice of Commencement
• Easements, right of way, (i.e. shared driveways, basements, roofs)
• Deed restrictions
• Municipal liens or fines
• Type of deed and is it insurable
• Quiet title needed?
• Special assessments (i.e. paving, public water or sewer, etc.)
• Condo Associations, (2 Deeds) need docs, check reserves
• Housing Restrictions (unrelated parties, student, over 55, handicap accessible, etc.)
• Zoning, wrong use

MLS:

• Is it currently listed?
• DOM (Days on Market)
• No comps, or comps are too varied
• Active vs. pending ratio
• High tax assessment to value ratio

Insurance:

• Property in flood plain or zone and on flood map requiring insurance
• CLUE report, uninsurable or difficult to insure
• Insurance escrow or not
• Lapse, adequacy of coverage

Property:

• Squatters
  
• Functional Obsolescence
• Septic, onsite systems
• Well
• Lead or galvanized plumbing
• Terracotta sewer
• Property preservation
• Structural damage (expansion cracks, main beams)
• Landscaping issues: retaining walls, bamboo, soil shifting, etc.
• No permits
• Illegal BR size < 70 sq. ‘
• Winterization
• Mold
• Crime, heat index, walkability, schools
• Asbestos
• Poor location, busy street, etc.
  
• Termites
• Dryvit, synthetic stucco
• Urea formaldehyde foam insulation (UFFI)
• Radon
• No parking
• Age of property
• Old or no windows, unsecured building (SimpliSafe.com)
• Knob & tube electrical (60A), grounded outlets every 11’, GFI’s
• Underground oil tanks, oil heat
• Gravity or steam heat, octopus
• Roofing: Flat roofs, slag, slate, Yankee gutters
• Pests: fleas, squirrels, bats, bed bugs, rats, etc.
• Chinese drywall
• No firewall
• Below sea level, slab
• Lead paint (prior to 1978)
• >60% rehab, new construction guidelines & building codes (i.e. Insulation code, etc.)
• # of Bedrooms (1 or > 4)

Market:

• Decreasing property values
• Interest rates
• Rent ratio to Selling Price
• County or local government requirements, high fines, unusual laws
• Onerous property inspections or rental requirements (i.e. licensing, sprinklers, etc.)
• Population declining
• Economy declining, if there's only one or very few employers locally/high unemployment
  
• Cost of labor
• Violent crime rate
• High mortality rate
• Medical care availability
• Poor business environment
  
• Rural
• Buyer’s market/oversupply