Bargain Buildings… Not Always the Best Deal
We’ve all heard about the surplus of empty buildings ready to be bought for pennies on the dollar. Before you make an offer, consider the following.
Get The Whole Story
- Who owns the real estate and why are they selling?
- Is it a bank foreclosure and will the sale require bank approval?
- Are there back taxes?
- Has the building been vacant for an extended period?
- Are there any pending legal issues associated with the property or liens filed against the property?
- Does the property have a Special or Limited Warranty Deed?
- Are there any partially completed construction or renovation projects? (If so, there may be mechanics liens.)
- Do you suspect the use of chemicals or processes that can cause site contamination?
Seek Professional Assistance
If you plan to renovate or repair a building, or if you are concerned about the condition of a building, involve a professional early in the process. A Design/Build contractor or Architect experienced with the type of building you are buying is essential. Your expert will know what to look for and what questions to ask.
Inspection of the building’s mechanical, electrical, plumbing, and roofing systems can reduce your risk of unexpected high-dollar repairs after purchase. Your expert may also recommend building and zoning code analysis, environmental assessments, or structural analysis.
If you plan to undertake significant improvements to the building, have a preliminary design and construction estimate prepared to help you determine the total cost of your endeavor. An expert’s fee is a small price to pay to reduce your risk of being burned with expensive repairs or building and zoning issues that restrict the building use.
Assess The True Cost
The building purchase price, repairs, and improvements can add up quickly when added to the cost of relocating. In addition to these one-time costs, know your annual recurring costs for gas, electric, water & sewer, and insurance. Ask the seller to provide utility usage information and check with your insurance agent before you make a decision. Will your property taxes or assessments change? Focus on the total monthly expense, not just the purchase price of the building.
A Few More Tips
If you are changing the use of a building (for example, from a theater to a church), it is important to understand the zoning of the property. Is your intended use permitted? Are there any special restrictions or conditions on the property such as Non-Conforming Use, Conditional Use, or Special Overlay District? Will you need to add parking if you change the building use? Researching and assessing zoning issues can be complicated. Professional assistance is critical when navigating the zoning process.
If you are moving to a new municipality, you need to know the income tax rate and how it will affect your employees. When moving your business from a township to a city, be aware that most townships do not have an income tax. Some employees may already pay income tax to the city they live in, but for those who live and work in a township, relocating to a city with a steep income tax can put a sizable dent in their net pay. Also, be aware of special tax situations such as JEDDs. A JEDD can have taxes levied by a surrounding municipality without the property being located in or annexed into the municipality.
If you plan to modify, repair or improve a building, it pays to know what it will be worth when the work is complete. An appraiser can determine the value based on the current building condition and by reviewing the proposed renovation drawings and construction estimate. This should help you avoid unpleasant surprises with the bank.
Mold & Asbestos
You may need the building inspected by a mold and asbestos specialist. Sellers are required to disclose the presence of mold and asbestos, but they may not be aware they are present.