Using Phase I Environmental Site Assessments provided by the property seller.

Learn why using a seller's Phase I Environmental Site Assessment is a recipe for disaster.

When it comes to buying anything in this world, the phrase has always been "buyer beware". It doesn't matter if it's a used car, sports memorabilia, a business, or a home, you as the buyer need to make sure you're not getting a bad deal. You should have the same mindset when it comes to purchasing a piece of either commercial or industrial property.

The reason I'm saying this is because of talking with a doctor of all people. My allergist was making small talk to me last week about moving into a new office soon because he was buying a small building and moving his practice to the other side of town.

During the conversation, I asked if he got a Phase I done on the property. He said no. Strike one.

He said he was using a Phase I report from a few years ago. Strike two.

And the report was given to him by the person selling the property. Strike three.

We just talked about how long a Phase I ESA is good for the other day (here's a hint, the old one is useless and probably won't be accepted by any lending institution). So why is it an issue to use a Phase I the seller provided? A report's a report, right?

No, and here's why.

A seller's Phase I Environmental Site Assessment shouldn't be trusted.

First off, are you sure you understand what a Phase I ESA is? Consider it like an investigation into a piece of property. Sort of like taking a used car to a mechanic. It's a collection of findings & opinions based on investigating a piece of property.

I broke it down to my allergist like this.

Ever buy a used car? If so, you know what a crapshoot it is. Sometimes you're going to get a lemon, sometimes you get a great car. But you know how it goes, you go and look at it, check under the hood pretending you know what you're doing, kick the tires, and make your decision.

You might call this your "due diligence". Make the wrong decision, and you're going to get stuck with someone else's old problems, like a bad transmission which you'll have to pay a fortune to fix. In fact, you could be buying a car that's more expensive to fix than what the car is worth!

But what if the seller of the car, either a lemon or a jewel, gives you a report from their mechanic? What if that report says "the car is just fine!". Would you believe it? Probably not! I know I wouldn't, I'm not that much of a sucker.

You hire your own mechanic and they look into the car. They give you their opinion. They're being hired by you, and (hopefully) have your best interests in mind. You would never trust a strangers word when it comes to a used car, and you wouldn't trust their unknown mechanic's report, especially if you're shelling out a few thousand.

So why would you trust someone else's word, or an unknown person's report, especially if you're looking to shell out hundreds of thousands of dollars?

You might be in the same boat as my allergist. He "trusts the guy he's buying the property from". I get it. I've heard it before. I've also heard "they used a competent environmental professional / company".

Maybe that's the case. We hear this every so often when we're asked to review someone's Phase I report.

Do we know the firm that produced it? What about the specific environmental professional? Are they trustworthy? Do the meet the credentials laid out in ASTM standards? Was the report prepared according to ASTM standards?

Surely, if an attorney, real estate broker, or honest regular guy gave us their Phase I report, it has to be okay, right? Isn't the environmental professional supposed to be impartial, and follow the ASTM standards? The answer to both of those questions is yes, but that doesn't mean I'd accept it.

It's not worth it. You have far too much to lose to risk gambling with your financial future, especially when investing in a piece of property. Get yourself your own Phase I Environmental Site Assessment by someone of your own choosing who you've vetted and trust.

Think of it like bringing your own mechanic along with you when you look at a used car. He's probably going to do a far better job diagnosing problems that you can, and he's looking out for your interests. And, compared to the cost of the car or that expensive transmission job, his cost is peanuts.

To learn more about Phase I ESA's, click here to contact us or give us a shout at 609-693-8301 to get educated and prevent a bad investment.