Home > Blogs > Due Diligence
681 views

Paul Miller's Blog

By Paul Miller | Agent in Bradford, MA

Due Diligence

There is a company is Asheville North Carolina (a beautiful city by the way) that is starting a business not unlike like the one that tells you the history of the used car you so desire.  The difference is that this service gives you the history of real property.  They will be able to search for building permits to see what kind of work has been done by competent contractors, and signed off on by various inspectors.  First of all, do we think that this is a good idea, and more importantly, what has taken so long for this kind of service?  Is this something that a potential homebuyer can do for himself?

 

It seems like a natural extension of the home inspection.  Since the dawn of the Internet people have researched not only cars used and new, before buying, but replacement windows, high definition televisions, and the computers from which they do this all-important research as well.  They will compare furniture prices and quality, interest rates on CD’s and even check the background on potential mates. Some of this research is done to determine the best quality available and some goes back to the second oldest instinct we have; saving money.  Hopefully though, frugality does not factor into finding potential mates.  I know people who drive across town to save a penny or two on a gallon of gasoline.  Ok, I admit it.  I can be one of them.  But the way I figure it, in my sixteen-gallon tank, it is possible for me to save a whopping 32 cents per fill up!  The point is, that a lot of pre-purchase research has been done by John Q. Public regarding everything from cell phones to breakfast cereal, but one of the biggest transactions that they will ever make, the building they will call home, is done on a whim, with lots of emotion, and a bit of hope thrown in.  When I put it into this context, this small amount of due diligence seems silly to me, but this has worked for such a long time.  Do we need to add another layer to the process?  Hasn’t the advent of the home inspection only made it better for the buyer?  The process may not be perfect, but it has worked.

 

I know that there will be a lot of people who think that this type of business is unnecessary.  I however feel that in the long run, people will learn to rely on this service.  Home sellers will begin to expect it, and get ready for it before putting their properties’ on the market.  Realtors will learn to deal with it just like a seller’s statement or a lead disclosure.  In no time, it will be part of the process, with brokerages offering the home report to clients as an incentive.  I’m sure that lenders too will jump on the bandwagon before too long and require these reports as a condition of underwriting.  The immediate beneficiaries, other than the service itself, which will be generating revenue from the company, will be the homebuyer and the industry in general.  The homebuyer will have a much greater level of confidence in the product he is buying.  He/She will be able to tell what work was done over the years by licensed contractors and when.  They will see that the building inspectors have signed off on the various projects, meaning that they were competently done.  Transparency will become more of a reality in the home buying process.  It won’t just be a buzzword for politicians anymore.  Therefore the industry will benefit from an improved image that will help us all.  

 

I am curious though to see how this type of business will be viewed in its initial stages.  Will Realtors, lenders, and inspectors embrace it?  What will the buyers and sellers think?  What will some of the objections be?  How long, if ever, will it take to become mainstream?  What do you think?

Best of luck

Comments

By Ron Thomas,  Tue Jul 5 2011, 13:55
The biggest failing of CARFAX is that a lot of the time, things go unreported: We can't force the owners to report everything they do, like replacing a water heater or repairing a squeek in the floor. But how about if it was a rental for a while and the tenants used it as a Meth Lab.
And the type of information that goes un-reported is exactly the kind of info you would want!
By Tanya Donaghy,  Tue Jul 5 2011, 13:59
Paul,

This is certainly something that the home buyer could do themselves. However, as with the rest of the home buying process, sometimes it is best to ask someone that is more familiar with the process for help.

I think this is a very interesting concept and one that could be of great value. However, as with all the other services that are provided to future home owners during the purchase process, this will need to be taken into consideration, but not depended on solely. Though these home buyers will benefit from this additional information, they will need to understand that there will be times that repairs may have been done that didn't require permits to be pulled and the work may have been done by sub-standard repair persons. This type of due diligence research service will be able to give the home buyer more confidence about the larger repairs that were done by contractors through building permits, but those repairs done by the homeowner themselves may not have gone through this same process and been signed off on by the local building inspector.

I think this is a great concept, but like the home inspection, it shouldn't be relied upon to give a complete picture of what work has been done to the house... it is still limited. As with any purchase of any product (new or used), there is going to be a risk of the unknown.
By Paul Miller,  Tue Jul 5 2011, 20:43
I think Ron and Tanya have brought up some excellent points! Any system is only as good as the information that is provided to it, and it isn't a magic bullet. If this service survives and thrives, it will only be a piece of the puzzle and should only be used as such. Thanks for the great input!
 
Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer