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The Value of Good Site Investigation

The Value of Good Site Investigation

No one wants to pay more for something than they have to. While something may appear to be a good deal on the surface, we all know that “you can’t judge a book by its cover.” Land is no exception. A site investigation, prepared by a trained professional, can be a wise investment for those individuals not inclined to buy a “lemon,” as it helps identify what’s “inside the cover of the book” when it comes to real estate. Many aspects of site investigations require the use of a trained professional such as an environmental, geotechnical, or civil engineer, a title attorney, or wetlands consultant to name a few. There are some obvious signs that should alert a potential buyer to hire such a professional to further investigate the property. Doing so could prevent a land acquisition that may lead to expensive development costs. It also allows the buyer to make an informed decision before purchasing the property.

Presence of Water
The presence of water on a site can create a litany of development challenges. In Georgia, the presence of a small trickle of water in what might seem like a drainage ditch can equate to a 75-foot or larger stream buffer on either side of the bank which cannot be disturbed except for very few exceptions. For an unsuspecting buyer, having to forfeit a considerable area of the purchased land that is ineligible for development could equate to buying the usable land at a premium. Not to mention the potential for increased construction costs that could result from an inconvenient location of such a swath of land on the site.

For example, let’s say five acres of commercial property was for sale at $200,000 per acre. A stream runs through the site requiring a 75-foot buffer to either side of its bank. Assuming that this stream is 200 feet long, this would eliminate approximately an acre from the property that could have otherwise been used for development. Therefore, a five-acre purchase at $200,000 per acre would yield four acres of usable land. The resulting purchase price for the usable land would be $250,000/acre.

Water’s Trickle Down Effect
The presence of water can trigger other potential problems besides stream buffers. A significant flowing stream could indicate wetlands or floodplain. In either case a professional engineer or wetlands consultant should be consulted to determine the impacts each can have on a proposed development. Either wetlands or floodplain can mean an area that cannot be developed or that requires a great deal of time and expense to develop. Contrary to the belief of some, wetlands can be eliminated and construction can occur in the floodplain, but there are limitations and costs associated with such development.

A client purchased a piece of property that had a significant stream flowing through the rear of the property. The real estate agent made the client aware of the floodplain but also indicated that he could build in the floodplain. The client purchased the property and hired a land surveyor to survey the property. The resulting land survey showed the entire property was located in the floodplain. Subsequently, I was brought on board as the civil engineer of record and began to investigate the implications. The end result was that the property could be developed, but due to floodplain restrictions, only .25 acres could be used as buildable area. The client had purchased one acre of land for $250,000 and only .25 acres of the land could be used. Effectively, the client paid $1 million/acre for the usable land.

Sewage Flows Downhill (If you can find downhill)
Another critical item affecting the value of a land purchase is whether or not a sanitary sewer tie-in is available to the site. If sanitary sewer is not available to a site, the alternative can be costly, particularly in developed urban areas. An owner could be forced to purchase a package waste water treatment system or use a considerable amount of expensive land for a septic field or a combination of the two. As a potential buyer, it is essential that the seller or the utility provider confirm all utility availability in writing.

A client of mine called me to investigate just such an issue. As a very savvy developer, he was conducting his own site investigation before making a purchase. He had obtained sewer maps from the county that seemed to show that sewer was right across the street. However, the site he was thinking of purchasing was lower than the street and the property across the street where the sewer tie-in was located. Upon further investigation, it was determined that this sewer’s tie-in elevation was above the grade of the road that would have to be crossed to get to it. This forced us to look for other tie-in locations, all of which included lengthy negotiations with either the adjacent railroad or private property owners whose improved areas we would have to excavate in order to install the sewer line. The obvious cost, in this case, was time and, likely, the purchase of expensive sewer easements and site repair once the sewer was installed.

Whether it be the presence of water, the less obvious presence (or absence) of sanitary sewer, or any of a number of other issues that can impede the development of a piece of property, professionals should be called upon to assist in site investigation before a piece of property is purchased for development. The price tag associated with a professional conducting a site investigation is small compared to the purchase price of property hindered by restrictions to development and/or utilities that can’t be accessed. It is also a small price to pay for information that can help the buyer determine the true value of the land. Before land is purchased, open the book and read a chapter or two instead of judging it by its cover.

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