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Property Access: A Gray Area For Investors

Published on Monday - October 14, 2013

Due diligence, as it pertains to real estate investing, requires that investors receive access to subject properties. However, some real estate investors are beginning to question whether or not their Realtor’s practices are legal. Are the moral boundaries of property access beginning to blur? More importantly, how can you tell if your agent has your best interests in mind?

When evaluating potential deals, it is now more important than ever for investors to physically inspect homes. This became clear in a recent Ohio court ruling that landed a real estate investor behind bars for five years; a scenario he blames on neglecting to ensure the condition of properties being purchased.

Obviously, it is essential for investors and their representatives to have access to properties for home inspections, appraisals and obtaining accurate quotes from contractors. Access also grants them the ability to show units to prospective tenants and end-buyers before closing on them.

Even if access is not granted for some reason or another, all properties should certainly be walked through on the day of closing. This is the last chance to bail out and make sure nothing major has changed while waiting for the real estate closing. If you fail to claim your walkthrough, the consequences can be disastrous and there will be no one else to blame but yourself.

With the evolution of the market and emerging trends, many subject properties are not granting walkthroughs.

This may be because of laziness or, in some cases, out of area investors that can’t make it to the property. In some cases, access is ‘forbidden’ before closing, which is ridiculous. Sometimes real estate agents freely handout combination codes to lockboxes and tell prospective buyers to let themselves in at their convenience. Unfortunately, however, there are an increasing reports of investors being told to ‘break in’ to properties if they want to see inside.

This raises several concerns about legality, fraud and liability.

What Are Your Rights & Risks?

As a buyer, you do have rights to access. You need to be able to determine the value of a property. Although, these rights can depend somewhat on contract language.

Being told to break-in, jump through the window or being forbidden access to units at any point in the process should be a huge red flag. At a minimum, it is unprofessional. In a worst case scenario, it likely means there is something fishy going on with the deal or there are issues with tenants which you need to know about before inking the deal.

Some have also recently argued the legality of Realtors handing out lockbox combinations for unsupervised access. Why they do it is pretty clear. It saves them time and money. Yet, debates in online real estate forums argue that it is forbidden by many Realtor associations. Legal or illegal, this can also increase liability. What if something gets stolen or broken in the home? Even the bad PR could be bad for business.

If it is a private seller or a real estate agent’s own property, this can be a different story and more understandable, but it’s always wise to error on the side of caution.

In summary; always complete your due diligence, always claim your walk-through, and whenever possible, have someone accompany you to view properties.

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