When buying or selling a property, a Phase I is really a no brainer. We discuss the top 5 reasons why someone selling a property may consider getting a Phase I in order to bolster their sales effort.
We just wrapped up a Phase I for a client around the corner from our offices. He was buying an old piece of commercial property, and knew the value of getting a Phase I ESA done before he actually bought the lot. It makes a lot of sense, and there are plenty of great reasons to get one done. After the whole thing was over and done with, we got to talking about selling property, and he asked
"Should a seller do a Phase I Environmental Site Assessment? Would that make any sense, or have any value?"
Great question!
While this is somewhat unusual, there are some great reasons why doing a Phase I ESA makes sense as a seller.
Let me say right off that we are constantly amazed at what we see when we do a Phase I Environmental Site Assessments on behalf of the buyer. Things that slow the deal down, cost the seller a lot of money, things that even kill a deal! Take a look at these photos which are from an actual site we visited not too long ago.
Who would leave their site looking like this?! Empty drums, visible spills, piles of scrap metal. And this wasn't even a scrap metal yard, or recycling facility, or any place you would expect to see this much metal. This was junk! Hint: This site deal fell through. The property owners were slobs and there was contamination present in multiple places on the property. Now their site's dirty, contaminated, worth a fraction of their asking price, they have an environmental headache on their hands, and their state's environmental agency is overseeing a clean-up. It's unfortunately costing the sellers a pretty penny. Hey sellers, if you're reading this, clean your sites up!
Recognize that any environmental due diligence you do as a seller will probably be looked at skeptically by the buyer’s side and their team of professionals. You’re biased, you think your property and business are great and that there’s nothing wrong, and so you’re asking a ton of money. May or may not be true, but that’s what the buyers will think of you regardless. So any environmental work you do will be viewed with a great deal of skepticism. Almost to the point of being irrelevant from the buyer’s perspective.
So I just talked you out of doing a Phase I right? Why would you even consider it if the buyer won't think it's worth anything?
Given these reasons, why wouldn’t you do your own Phase I ESA prior to a property or business sale. Sure, maybe the buyer won’t accept your Phase I ESA, but the results you’ll obtain in the long run far than make up for this shortcoming.
While it doesn’t happen as often as it should, environmental due diligence performed by the seller does a lot of good before the sale. Consider it the next time you’re in that position.
If you're looking for more information about Phase I's, click here to contact us or give us a call at 609-693-8301 to discuss your needs today.