When considering any kind of real estate transaction, due diligence must be your top priority. The more information an investor has about a property’s physical condition, title and legal claims history, the lower the risk of hidden risks and liabilities impacting long-term profitability.
Research shows as many as 30% of commercial real estate transactions involve some form of post-sale dispute, potentially costing thousands of dollars in legal fees to properly address.
By performing thorough due diligence, investors can shield themselves from risk and uncover vital information that can help to inform practical, profit-minded decisions. With this in mind, the below post explores 5 ways public property records can help to strengthen due diligence.
What Are Public Property Records?
Public property records are official documents held by local government agencies that detail the value, ownership history and legal status of a piece of real estate. These records provide up-to-date, unbiased information about the quality and legally permissible uses of a property.
Key information to look for in public property records include:
-
Ownership history: Who owns and has owned the asset and how much they paid.
-
Property characteristics: Lot size, square footage, age and construction materials.
-
Financial data: Assessed market value, property tax and mortgage information.
-
Legal claims: Details about outstanding liens, judgements, easements or covenants.
How Can I View Public Property Records?
To view public property records, you can check the recorder or tax assessor on your county website or use an online real estate data and research platform like PropertyShark. Using a real estate data platform is often most convenient as, by simply typing the property address or parcel ID number into the search bar, you can find all relevant property records in one place.
5 Ways to Use Public Property Records for Due Diligence
Public property records provide accurate, up-to-date, unbiased information about the history and current status of real estate assets. Provided you access these records through a trusted platform, the details they provide can be vital in performing a thorough due diligence process.
1. Verify Title Chains
Public property records provide a chain of ownership associated with a specific property. This information can help you to confirm who the current owner is, how many times the asset has changed hands in recent years and whether there are any strange gaps in ownership records.
Verifying the title chain is an important step in the due diligence process as it can help you to ensure that the seller actually owns the asset and has a legal right to sell. When conducting this research, use a real estate data and research platform that can provide full contact details for the owner, not just LLCs linked to the property, to thoroughly verify all accountable parties.
2. Confirm Physical Characteristics
Comprehensive public property records will include detailed information about the physical characteristics of a specific property. This information can help you to determine the age of the asset, its structural condition and what the property can be used for in a practical sense.
A thorough review of building characteristics information can help you to identify any issues with the building that may not have been disclosed, as well as provide insights into whether the asset can be used to meet your needs and the potential cost of your planned operations.
3. Review Building and Permit History
Public property records can tell you what commercial real estate upgrades have and can be made to a property. By reviewing the property’s building and permit history, you can confirm that all current renovations are properly permitted and remain compliant with building codes.
It’s crucial to check the building and permit history before you move forward with a purchase as any unpermitted work or existing code violations will become your legal responsibility after closing. Properly reviewing this information can help you to avoid costly and time-consuming issues post-closing like forced repairs, voided insurance and fines associated with violations.
4. Assess Zoning Information
Reviewing accurate and up-to-date zoning information is a critical step in the due diligence process that will help you to determine exactly what an asset can be used for. By analyzing public property records, you can check if a property can be used for your business purposes.
Comprehensive zoning information included in public property records will provide insights into zoning ordinances, setback requirements and potential environmental liens associated with the site, helping you to avoid legal problems and ensure the property meets your needs.
5. Identify Financial Liabilities
Identifying and understanding financial liabilities associated with a property is one of the most important steps of the due diligence process. Any outstanding fines, liens or encumbrances tied to the property will become your responsibility post-closing, so uncovering them is crucial.
A comprehensive property report built from public property records will provide details about all financial encumbrances associated with the asset. Use this report to find and investigate any unpaid taxes, contractor bills, court-ordered debts or loan payments tied to the property.
Final Thoughts
Purchasing a property for investment or commercial purposes can be a time-consuming and complex process. Alongside identifying an asset in the right location and at the right price, you’ll need to ensure that the property is in good condition, free from financial encumbrances and legally permitted to be used for, or modified to meet, your unique business requirements.
Following a strict due diligence process can help to ensure that a property you’re interested in both meets your needs and is a safe investment. By reviewing comprehensive public property records sourced from a trusted platform, you can verify details passed on by the seller and check no hidden issues are tied to the asset to help guide a smooth sales process.
