Selling residential lot - should I provide geotechnical report upfront?

Question

My wife and I are new real estate investors. In less than a year we ended up with three properties. We were planning to move from our home in Austin to an area with acreage lots. We found a sub-division in Hutto that met most of our criteria. It was not our ideal location, but interest rates were low and this was our opportunity to buy our house of our dreams. The subdivision we found has great homes and plenty of empty lots. We purchased one of the lots, best one available. We hired a general contractor and started the build process. We have no complaints with the GC, but it seemed that the project was very slow. We had selected our floor plan, interior selections, and received a price. We negotiated the price down and even gave up some options, but we were still committed to building the home. Then our GC went on vacation. This is when we decided to see if any existing home out there would meet our needs. And we went to our ideal location and found a perfect home that was recently renovated on a large lot for less than the price of new construction. So we jumped on it, canceled out contract with the GC.

We turned our home in Austin to a rental. We used Bigger Pockets as a resource. And we have good tenants.

So now we have a 1.4 acre lot. A buyer approached me before I listed the lot up for sale. We have communicated back and forth through email, but there has been no contract drafted. The buyer has asked for the soil report on the lot. I don't have anything to hide, but the geotechnical soil report cost me $1500. I am reluctant to just share that, but I am also afraid to turn off potential buyers, as it may look like I am hiding something. How should I handle this? Should I tell them I will provide the report when are under contract. Should the sale price include the soil report cost? Any advice would be appreciated.

Wayne Brooks · Answer

Make it available now, don't try to charge for it. It will be to your advantage, as it's already done. But make it available as reference only, with no liability as to it's accuracy, and not mentioned in the purchase contract. "Buyer is still responsible for their own site investigations, etc."

Lynn Currie · Answer

Yes, provide it. You've already bought it and withholding it gives the appearance that you're hiding something. Bryan's strategy of asking that they pay for it if they purchase the land is good. Tactically, I would ask for the buyer to credit me the full or half amount of the report if they purchase the lot at closing, but I would ask them for this before I give them the report. That way, there is no appearance of hiding something and you are essentially negotiating the 'sales price' of the report before they have it in their hands.

Bryan Hancock · Answer

Anything east of the interstate should raise flags for soil in the Austin area so the buyer is being prudent asking for the report. I would provide it to them and try to negotiate it as a credit for yourself at closing. Welcome to BP!

Kevin Martin · Answer

Just curious, is there anything in the report that would raise some red flags?

Victor Noriega · Answer

Thanks for the replies. The geotechnical report provided the information for what type of foundation is best suited for the lot. It is 5 months old and still a valid report. I had a survey of the lot done and provided that information to the buyer. I will provide the geotechnical report to the potential buyer, as it is a sunk cost. I will however add that the report is for reference only. With the sale of this lot, I plan to use the $ for another rental. So I guess it is in my best interest to be upfront and get it sold.

Bill Gulley · Answer

So, this is the question. Is it required in your area to provide the report to a buyer? If so, provide it. If it isn't, if it's only a matter to address between a contractor and owner for a permit, then it may have a restriction as to its use, like an appraisal made for a client. It might not be a usable document for any requirement by another owner. Why did you get it? What good is your report to you? I'm guessing if it's not required and it can't be used by someone else, it's rather useless isn't it? If it is and it's valid and can be used by a buyer I'd say it goes with the lot, use it in negotiations, but you're probably not going to sell it so to speak you just let the original go with the lot.....and the engineer may need to agree I would think. It's a "soft cost" in your cost of acquiring your lot, you should be seeking that money from the sale, if that's the case, a buyer would be buying the information along with the dirt wouldn't they? So, why not show it? If it supports a good buying decision why wouldn't you show it? :)

Account Closed · Answer

How old is the report that you had done when you bought the lot? You may be able to use that one. If you bought without a study, I recommend you have one done and get the boundary corners marked by a surveyor. Roll the cost into the purchase price or else they become potential negotiating points that you don't want.