Due Diligence: Don't Design Homes Without It

a note from bill

due diligence: don't design homes without it

​THE DREADED MONEY PIT. HOW DO WE AVOID IT? THIS MONTH’S NOTE FROM BILL DISCUSSES THE IMPORTANCE OF QUIETING THE EXCITEMENT OF BUYING NEW PROPERTY, SO THAT YOU DON’T MISS THE RED FLAGS THAT COULD COST YOU LATER. 

When you come across a property that you absolutely love, it’s especially easy to feel anxious of potentially losing it to another buyer, so you pursue more aggressively than you really should. And we’ve all heard the horror stories: the couple who excitedly purchases their first house, only to find out months later that the foundation beams are rotting away; or the developer, with big ideas of an apartment complex, buys a property only to learn after closing that the site isn’t even zoned for that purpose. A property that bleeds you dry—financially, at least—strikes fear into all of us, yet it’s all too easy to think, “oh, that will never happen to me.”
 The only way to steer clear of costly mistakes down the road is to think critically and do your due diligence before buying. When comparing which is worse, losing out on a property to another buyer or purchasing a property with significant underlying issues that need attention, I will always think the latter is far worse. Believe me, I know that it’s not ​fun to start imagining yourself in a home, only to have that property sell to someone else. But remember: there will always be another property. By applying these considerations, that next property will be far less likely to be a so-called “money pit”.

1. BUY THE PROPERTY YOU CAN TRULY AFFORD.

Your lender might approve you for a mortgage that’s much higher than you originally anticipated. That shouldn’t be a green light to spend more. Times change, things happen, it’s better to be more conservative with your financial limits, if for nothing else, to reduce the stress of stretching your income.

​2. THE PURCHASE PRICE IS NOT THE PRICE. ​

Don’t focus too much on the down payment / monthly payment. Your monthly costs will also include property taxes, homeowner’s insurance, utilities, HOA fees, and maintenance.

3. BE SKEPTICAL OF “FLIPS”.​

It’s more common than you think for flipped homes on the market to simply be “fluffed” up to look more appealing to buyers. There could be dire issues beyond that fresh coat of paint and newly installed finishes. You can’t cut into the walls, but you can certainly ask for receipts of renovation work that’s been done.

4. HIRE YOUR OWN INSPECTOR.​

Be wary of using an inspector referred by the seller’s agent; they have standards, but might not be doing the best possible walkthrough as an inspector without ties to the seller’s party.

5. SEE THE PERMITS. ​

Many homes go on sale with additions and renovation work that had been done without the proper permits. Be sure to check the legality of the work that’s been done; typically, the city or county have permits under public record. This is extremely important to do, because most jurisdictions hold the current owner liable for this, meaning possible fines or shelling out money to correct the unpermitted work.

By no means is this an end-all-be-all list of where to do due diligence on a property, but in my experience, it’s a substantial starting point. To get an even clearer picture, Studio21 Architects has developed a comprehensive investigation into the feasibility of any work you may want to do on your home: the Design Discovery Review, the use of which is a thorough, yet crucial, starting point. When assessing a property that you are interested in, there are two main facets to consider: the financial and the structural, both very different, but each having their own capacity to lead you to the dreaded money pit.

ALL THE BEST,​

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written by: bill styczynski

Bill Styczynski is the president of Studio21 Architects, as well as an architect in his own right. Every month, Bill writes an article for the Studio Pages newsletter about design topics that he believes will be informative, helpful reads for all of our clients, established and potential.