On Real Estate & More – July 2023

I previously helped clients with the purchase of their first home. As a part of the due diligence process, I went into the planning department to inquire about permits on the property and any long-range plans for the area. I was told that the vacant lots next to the parcel, which my client saw as a great asset, were soon to be constructed into a major arterial roadway. This information had not been included in the seller disclosure statement and so the deal quickly fell apart. But it got me thinking about due diligence and how essential a part it should play in a purchase transaction.

Under Oregon law, the seller has a legal duty to disclose all known information and the seller can be held liable for any intentional misinformation or omissions. However, oftentimes, the seller is unaware of these items so it is important to do your own research. Following is a list of issues that should be researched as part of the due diligence process, some more common than others:

Most Common:

Title Review—One of the first things you should examine is the title history on the property. A thorough title review can tell you whether there is any litigation pending that might threaten the title of the property, whether the seller actually has title, and whether there are any encumbrances or financial obligations, such as a mortgage or tax lien.

Inspection—A home inspection is a visual inspection of a house and its components including the roof, siding, doors, windows, framing, foundation, drainage, built-in appliances, plumbing, electrical, heating and cooling, chimneys, interior living spaces, ventilation, insulation, crawl spaces, attic spaces and in some instances, for wood destroying insects and fungi. The home inspection should give you a clear idea of the structural integrity of any building on the property and can also point out any potential physical problems.

Septic—A septic inspection will typically include locating the system and uncovering access holes, checking for signs of back up, measuring scum and sludge layers, identifying any leaks, inspecting mechanical components, as well as pumping the tank.

Well Water—Under Oregon law the seller is required to test domestic wells used for drinking for arsenic, nitrates, and total coliform bacteria. Additional well testing will give you a better idea of water quality and if any contamination exists, as well as if the system components are up to code or require maintenance. A flow test determines the rate at which the well delivers water.

Appraisal—An appraisal will give you a third-party estimate on the value of the property. Appraisals are necessary if you want to finance the purchase, but you may want to consider an appraisal even if you are paying cash to help you evaluate the value of the investment.

Land Uses/Zoning—You should find out whether the property is zoned for the purposes that you want to use the property for and if there are other applicable restrictions, such as if the property is located in a floodzone or is considered historic.

Permits—Make sure the improvements on the property have been permitted and the permits finaled. Otherwise, as the new property owner, you become responsible for the conditions of the property, including unpermitted construction.

Homeowners’ Association Documents and CC&Rs—It is important to see all related financial, legal, and operational documents of the HOA and to find out any special unit or building restrictions (the CC&Rs), whether there are any unpaid HOA fees, unit violations, how much money is saved for paying long-term repairs, and how much the HOA insurance covers.

Less Common Inspections/Tests:

  • Irrigation and pool equipment
  • Lead and Asbestos
  • Mold
  • Sewer line inspections
  • Radon
  • Underground Storage Tanks

Other Questions to Consider:

  • How long has property been on the market and what was the original price? Has it had any offers?
  • What was the last sale date and price for the property?
  • What are the property taxes?
  • When was the latest appraisal done and what did it come in at?
  • Are there any second mortgages liens, or is this a short sale or foreclosure?
  • Has this property ever been surveyed?
  • What services does the town provide (trash pickup, police, fire protection)
  • What school district is the property in and how are the schools rated?
  • What is the fire department response time?
  • What is the cost of utilities for the house?
  • What is the road/driveway composed of and is it a private road? If yes, does it have a maintenance agreement?
  • Is this in a flight path, or near a highway or railway?
  • Are high tension power wires or cell phone towers nearby (or within visibility)?
  • Is the property basically flat, gently sloping, or steep where the house is?
  • Is the property or home known to suffer from drainage problems or had flood or water damage?

Make sure to consider these items with your real estate agent when you are next in the market for a home. It will help you in the long run.