Do Due Diligence

Real estate due diligence is for everyone contemplating a home remodel, addition, new house, or purchase of land you plan to build on. You don’t have to be a professional developer, you just have to want to save money and avoid headaches.

Understanding zoning restrictions, private deed restrictions, neighborhood covenants, utility availability and environmental conditions is essential to a smart development strategy and realistic economic projections.

Real estate developers and buyers must perform detailed research to understand the real costs and scheduling of a land purchase or building project. They often have a team of professionals who evaluate a piece of property and make recommendations about the feasibility of a project before the real money is committed.

But home owners with small construction projects also need to know what rules apply to avoid delays, unnecessary expense and headaches at City Hall. Even a relatively small home remodeling project can be full of unanticipated hurdles. It pays to do some investigation before you make big money commitments.

Before you start a home remodeling project involving new outside construction, get an understanding of zoning restrictions, existing utilities, drainage requirements and building codes.

Here’s a thorough list of due diligence activities you may want to perform for a true hands on approach.

1. Have a local surveyor prepare a survey with boundary, utility easements and building setback lines. Include existing structures and obtain existing ground elevations on the property, slightly beyond the property lines, top and bottom of street curbs, finished floor at each exterior doorway, base of any trees you wish to keep and any other distinct features on your property that will remain after your project.
2. Draw a scaled site plan (two-dimensional view of the property looking straight down from above) that shows the overall footprint of your addition. Put on some dimensions so everyone understands the size of your project. Draw elevation views of each side of the new addition (a two-dimensional view looking straight ahead at each wall of your addition). Add dimensions to show the bottom and top of windows, doors, eaves, and highest point on the roof.
3. Investigate whether your neighborhood has restrictive covenants and whether there is a neighborhood review board and a process for review. The best place to start is with your neighborhood association president. Many cities maintain a database of neighborhood associations with contact information. Call City Hall and ask if you don’t know.
4. Call your local zoning authority and find out the zoning of your property. Get a copy of the pertinent sections of the zoning code that address required yards or setbacks, maximum building heights and maximum lot coverage. Bring your site plan and ask them to help identify any possible zoning pitfalls. Ask how you could get relief from the zoning requirements if you can’t comply. Most cities have a zoning board of adjustment that has the authority to hear individual cases and modify requirements under special circumstances.
5. Arrange a meeting with the building permit office and take a copy of your site plan and building elevations. Ask them to explain what they will be looking for when you apply for a permit. Get a list of all permits required, what documents they need for review, how long it takes and how much it costs. Ask how you could get relief from building codes if you can’t comply.
6. Ask the building permit office to explain any drainage requirements you must meet on your project.
7. Most cities have a utility locator service that will come out and mark the known locations of all utilities, usually within 2-3 days.
8. Make adjustments to your plans to avoid conflicts with utilities, drainage, building code requirements or zoning restrictions.
9. If you need a variance from any of the requirements, follow the process carefully and seek the relief you need.

So here’s my advice: Don’t close on a construction loan, hire a contractor or buy materials until you have completed these due diligence activities and any variances or special use permits are assured. You don’t want to be on the hook for financing interest or have the wrong materials in hand until you are absolutely ready to begin construction. Use the comments and ask questions if you want to know more.