Analytical tools for agents of buyers and tenants

An agent of a buyer or tenant is duty-bound to check out available properties to purchase or lease since they are employed to located property most likely to satisfy their client’s needs. The agency rule is “know what you are peddling so not to mislead the buyer or tenant.” [Jue v. Smiser (1994) 23 CA4th 312]

When a property the agent locates appeals to the client, the agent needs to look into the property’s ownership and its physical and title conditions to collect information for review with their client before the client can intelligently decide the optimal price or rent they are willing to pay.

To consider the depth of this agent duty to consumers of real estate services, be aware that buyers and tenants over the past few decades have become fully dependent on agents for their purchase or leasing real estate. Rarely do participants in property transactions directly contact other principals themselves — relics of the past. Very few direct contacts between owners and users occur. Thus, agents have become, essentially, the gatekeepers for a consumer’s entry into a real estate transaction.

Part of properly representing a buyer or tenant is to note that a client’s nexus to determining a property’s usefulness and worth for their purposes is solely their agent who gathers information the client needs to make an informed decision about their purchase or lease.

An agent representing a client seeking property for purchase or lease gathers critical transaction information by interviewing the seller or seller’s agent about the property’s condition, rent or price, conditions in the surrounding area and overall suitability for the client’s purposes.

A homebuyer’s agent attending an open house uses the Open House Agent Interview Sheet to document their observations and discussions about the property. The form is a guide the buyer’s agent to conduct an interview with the seller’s agent or other representative. The purpose served by the form is to provide:

  • an investigation checklist of meaningful property conditions, existing mortgage financing, surrounding neighborhood and the seller’s motivation;
  • a framework for asking questions to gather the information; and
  • documentation for what was gleaned from observations and conversations as proof of a diligent, non-negligent effort. [See RPI Form 320-2]

An agent scouting a commercial building for a buyer or tenant uses the Agent Survey Sheet for Commercial Property as a checklist to gather and document information for determining the suitability of a commercial property for their client. [See RPI Form 320-3]

Related FARM letter:

FARM: 5 things to ask at an open house

Questions to ask in an open house

During an open house of a single family residential property an agent believes might meet their buyer’s needs for ownership, the buyer’s agent collects and notes information for review with their buyer, including:

Information about the seller includes:

  • their reason for selling, as this gives an indication of how motivated the seller is to sell promptly;
  • where they are relocating after the sale;
  • when they are vacating and when the property will be available for possession;
  • their profession;
  • any nonprofessional relationship they may have with the buyer’s agent;
  • civic organizations in which they are a member;
  • marital status and location of other family members;
  • health condition;
  • any litigations; and
  • other properties owned. [See RPI Form 320-2 §§1.1 through 1.10]

Information about the property includes:

  • when the property was acquired;
  • the age of the property;
  • specifics about the property, such as square footage, lot size, bedrooms, bathrooms, roof type, exterior, patio, garage, type of construction, landfill and landscaping;
  • components of the property with upgrades, when it was installed and the condition of the improvements;
  • whether a hazard insurance claim was conducted within five years;
  • any city certifications, including retrofitting/ordinance compliance;
  • zoning and use restrictions;
  • service providers for the property;
  • whether a marketing package was received for the property;
  • whether a natural hazard disclosure (NHD) was received [See RPI Form 314];
  • whether a transfer disclosure statement (TDS) was received [See RPI Form 304];
  • a termite or pest report;
  • property operating costs contained in an annual property operating data sheet (APOD) [See RPI Form 352];
  • security and crime at or around the property;
  • whether a multiple listing service (MLS) printout exists for the property;
  • whether a title profile was obtained;
  • who the owner is vested on title;
  • any Mello-Roos bonds and the amount;
  • the rental value; and
  • whether the property is located in a common interest development (CID). [See RPI Form 320-2 §§2.1 through 2.19]

Information about the location/neighborhood includes:

  • a description of the neighborhood;
  • traffic and bus stops;
  • non-single family residential (SFR) zoning nearby;
  • noise levels;
  • area amenities, such as schools, shopping, banks and business offices;
  • the number of homes of equal value in the neighborhood;
  • the number of homes of greater value in the neighborhood; and
  • the number of homes of lesser value in the neighborhood. [See RPI Form 320-2 §§3.1 through 3.8]

Information regarding third parties with knowledge of the property includes:

  • the existence of any prior offers to buy the property;
  • why the offer was not accepted;
  • whether any other agents viewed the property;
  • whether neighbors visited the property or open house;
  • police information on neighborhood security [See RPI Form 321];
  • foot and street traffic in the neighborhood; and
  • whether any notoriously difficult neighbors exist in the neighborhood. [See RPI Form 320-2 §§4.1 through 4.6]

Information about the terms of sale includes:

  • the listing price;
  • whether the listing price was reduced, and if so, when the price was adjusted;
  • the expected sale price;
  • the fair market value (FMV);
  • the price originally paid;
  • existing financing; and
  • the seller’s conditions for new financing. [See RPI Form 320-2 §§5.1 through 5.4]

Miscellaneous questions to ask at an open house includes:

  • whether a tenant is in occupancy;
  • the name of the listing agent;
  • whether there are any problems working with the buyer’s agent; and
  • how the open house agent is being paid. [See RPI Form 320-2 §§6.1 through 6.5]

Related article:

Are open houses worth it?

Information to gather for commercial property tenants or buyers

The information a commercial tenant or buyer’s agent may consider collecting to help their client make an informed decision includes information about the:

Property information includes the:

  • address;
  • total interior usable square footage;
  • lot size;
  • year built;
  • construction type;
  • building zoning and uses;
  • roof/support construction type; and
  • number of parking spaces. [See RPI Form 320-3 §§1.1 through 1.8]

Office/improved space information includes the:

  • interior usable square footage of existing office/improved space;
  • number of bathrooms;
  • kitchen facilities description;
  • breakroom/staff lounge facility description; and
  • whether there is a sprinkler system in the office/improved space. [See RPI Form 320-3 §§2.1 through 2.5]

Warehouse space information includes the:

  • interior usable square footage of the open warehouse;
  • ceiling clearance height in the warehouse;
  • type of flooring in the warehouse;
  • description of loading docks;
  • description of truck wells;
  • description of ground level doors for the warehouse;
  • suitability for the distribution of shipping and receiving;
  • nearby railroads;
  • sprinkler system in the warehouse;
  • gas main;
  • electric service panel capacity; and
  • type of lighting in the warehouse. [See RPI Form 320-3 §§3.1 through 3.12]

Lease term information includes:

  • the monthly asking rent;
  • any tenant move-in incentives offered;
  • planned incremental rent increases;
  • the term of the lease;
  • security deposit;
  • required upfront prepaid rent;
  • any option to extend the lease;
  • any option to buy the property;
  • any right of first refusal;
  • maintenance costs paid by the owner;
  • utility expenses paid by the landlord;
  • whether the owner or tenant will pay for property taxes and insurance premiums;
  • monthly common area maintenance (CAM) charges for the space;
  • whether the tenant or owner pays tenant improvements (TIs);
  • whether the tenant or owner pays repairs for vandalism or earthquake damage; and
  • the date the tenant may take possession of the property. [See RPI Form 320-3 §§4.1 through 4.17]

Sales term information includes:

  • whether the property is offered for sale;
  • the listing price;
  • the sale price expected and FMV;
  • the price the owner paid for the property;
  • what informed the listing price;
  • the minimum down payment expected;
  • existing financing; and
  • new financing. [See RPI Form 320-3 §§5.1 through 5.8]

Location/neighborhood information includes:

  • a description of the surrounding area;
  • the volume of foot traffic the location receives;
  • the distance to the freeway;
  • the closest bus route;
  • distance to the nearest post office;
  • distance to the nearest bank;
  • distance to a police station;
  • distance to a fire station;
  • distance to local amenities, such as restaurants and shopping;
  • whether local food truck service is available;
  • distance to the regional airport;
  • problems with vandalism or crime reported in the area;
  • known prior earthquake damage in the area, earthquake faults or seismic hazards; and
  • problems with noise nuisance in the area. [See RPI Form 320-3 §§6.1 through 6.14]

Property investigation information includes:

  • available printed information on the property the owner’s agent can provide;
  • title information;
  • whether the mortgage lender will subordinate to the tenant’s lease;
  • the reason the owner is leasing or selling the property;
  • whether there were any prior offers to rent;
  • whether there were any prior offers to buy;
  • whether subleasing is allowed;
  • personal property included;
  • whether the property is in compliance with city ordinances;
  • certifications and retrofitting required;
  • the existing internet connections and phone lines;
  • energy efficient improvements;
  • the energy performance score;
  • limitations for placing a sign/logo on the property;
  • whether landscaping can be modified;
  • other properties owned by the owner;
  • the owner’s age;
  • the type of business operations of other tenants in the building;
  • the length of time other tenants have occupied the property;
  • contact information of other tenants;
  • whether the property has been maintained;
  • the extent of improvement obsolescence;
  • security measures installed at the property;
  • the local vacant property absorption rate; and
  • the property’s unique benefits. [See RPI Form 320-3 §§7.1 through 7.25]

Operating expenses information includes:

  • property taxes;
  • office expenses/supplies;
  • advertising;
  • electricity;
  • gas;
  • water/sewer;
  • trash;
  • insurance;
  • management fees;
  • lawn/gardening;
  • janitorial;
  • maintenance;
  • repairs and replacements;
  • cable/phone;
  • accounting/legal fees;
  • security system;
  • HVAC maintenance; and
  • roof maintenance. [See RPI Form 320-3 §§8.1 through 8.18]

The owner’s agent information includes:

  • the agent’s name and license number;
  • the broker’s name and license number;
  • the agent’s phone number; and
  • the agent’s email. [See RPI Form 320-3 §§9.1 through 9.3]

Related article:

Industrial real estate set to normalize

Armed with a complete and detailed profile of the owner, the neighborhood and the condition of the property selected for the agent’s review with their buyer or tenant, the collected data and information contributes to a decision on the suitability of a property and what price and terms to offer for the purchase or lease of the property.