Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.
The purpose of an Environmental Survey is to identify any potential contamination in the soil and groundwater before the deal closes. The findings will determine if the buyer will proceed with the purchase at the agreed upon terms.
Many lenders require an Environmental Survey. But regardless of loan type, ordering one is a best practice and a good insurance policy against past unknown environmental conditions that may not be visibly present.
In most deals, Environmental Surveys start and end with what’s called a Phase 1 Survey.
Phase 1 Survey
During a “Phase 1”, a visual and historical inspection is performed to identify potential current or past environmental issues. The findings in this report have the potential to hinder the property’s value significantly or even limit its intended use.
This survey offers a lot of value to the potential buyer. In short, if there’s contamination present and the buyer acquires the property without knowing…it becomes the buyer’s burden.
Phase 2 Survey
If the findings of the Phase 1 Survey recommend a Phase 2 Survey…that survey will include additional subsurface environmental testing, sampling and analysis. The procedure will go well beyond what the standard Phase I does. The depth and scope of this portion is dependent upon the Phase 1 findings.
The purpose of conducting such an in-depth level of Phase 2 testing is to confirm the presence, or absence of, petroleum solvents or hazardous waste in the subsurface of the site or existing building. This encompasses previous and neighboring uses, ranging back sometimes more than a century ago when environmental practices and laws were very lapse or non-stringent.
So, one of the most valuable findings from this survey would be that it uncovers potential dangers from former uses. Uses such as a dry cleaner or gas station present higher risks of contamination.
When it comes to completing due diligence, it’s better to be safe than sorry when it comes to environmental investigation.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@soldbybeachwood.com