IOS Due Diligence: The Checklist

The biggest red flags are unknown environmental history, a use the current zoning won't allow, no legal access, and floodway or wetland acreage. After those, watch for title encumbrances that block the planned layout, utilities that are far away or undersized, and a seller who won't share prior reports. Any one of these can turn a cheap site into an expensive one, so price them before you commit hard earnest money.

Incomplete diligence lowers what a buyer will pay because every unknown gets priced as a worst case or a delay. Most buyers want a Phase I ESA, an ALTA/NSPS survey, a title commitment, a zoning verification letter, a flood determination, and utility confirmations, plus geotechnical work and demolition or site-work bids if they plan to build. A seller who orders the basics up front usually gets cleaner offers and fewer retrades.

Most buyers do their own diligence during a contract feasibility period, because lenders and investors need reports addressed to them. It still helps to ask the seller for any existing Phase I or Phase II reports, surveys, title policies, permits, and leases up front. Seller-provided reports speed things up and reveal issues early, but a buyer typically orders updated versions in its own name before closing.

Yes, for any site where existing improvements must come down, a firm or at least a detailed contractor bid is the safest basis for land value. Land value equals what the site is worth cleared, minus demolition, abatement, and removal costs. Asbestos, lead paint, buried foundations, and tanks are where rough estimates fail, so get a pre-demolition asbestos survey before relying on any number.

Ask the seller for any Phase I or Phase II Environmental Site Assessment, tank closure records, spill reports, remediation letters, and state agency correspondence. If nothing exists, order a new Phase I that follows ASTM E1527-21; it is also how a buyer qualifies for CERCLA landowner liability protections. Prior reports are useful history, but a Phase I is generally considered viable for only 180 days to one year.

Start with a Phase I ESA, which includes a search of federal and state environmental databases such as Superfund, RCRA, leaking underground storage tank, spill, and brownfield lists. You can also search your state environmental agency's online records and EPA's public tools for the address. If a listing appears, request the agency file to see the contaminants, the cleanup status, and whether a no-further-action letter was issued.

Removing a small commercial underground storage tank commonly runs in the low five figures per tank when no contamination is found, covering excavation, cleaning, disposal, backfill, and closure sampling. If soil or groundwater is contaminated, cleanup can push the total into six figures or more. Costs vary by region, tank size, and state rules, and some states have tank trust funds that reimburse part of eligible cleanup costs.

Usually, yes. A monitoring well generally means someone has been investigating soil or groundwater, and that work is often documented in a state environmental agency file or database that a Phase I will find. It does not prove the property itself is contaminated; the well may track a plume from a neighboring site. Ask who installed it, why, and what the latest sampling results show.

Yes. Oil, gasoline, diesel, antifreeze, brake and transmission fluid, and battery acid commonly leak onto soil at salvage, junk, and vehicle storage yards, often over decades. Heavy metals and solvents are also common. Any former salvage or vehicle repair use calls for a Phase I, and usually a Phase II with soil sampling, before a buyer closes or a lender funds.

In the as-if-vacant highest and best use analysis, yes: the appraiser assumes the land is vacant and available for its best use. Market value of the property as it actually exists, however, must account for demolition costs and contamination. A common approach values the site as if unimpaired, then deducts remediation costs, any use restrictions, and a stigma or risk adjustment supported by the market.

No. Land in a 100-year floodplain (Special Flood Hazard Area) can often still be used for outdoor storage or parking, or built on if structures are elevated or floodproofed and fill is permitted. The discount depends on how much of the site is affected, insurance costs, and local rules. The regulatory floodway is far more restrictive, because development there generally requires an engineered no-rise certification.

Yes, if the ground is actually above the base flood elevation. A Letter of Map Amendment (LOMA) from FEMA removes a structure or parcel that was mapped into the flood zone in error, based on surveyed elevations. If the land was raised with fill, the path is a LOMR-F. A successful LOMA or LOMR-F can remove the federal flood insurance requirement and much of the buyer discount.

Not necessarily. A LOMA request is typically supported by an elevation certificate or elevation data from a licensed surveyor or engineer, plus a legal description and recorded plat or deed. A full ALTA survey is not required for the FEMA filing. Order the elevation work first to see whether a LOMA is viable, then decide whether a full survey is worth it for the sale or financing.

Usually not as steep, but the discount should reflect the real cost and time of getting there. Fill, compensatory storage, engineering, a LOMR-F, and local floodplain permits all cost money and can take months, and some communities restrict fill in the floodplain. Buyers typically discount the land by at least those costs plus a risk margin until approvals are in hand.

Often most of it, but not always all of it right away. Once FEMA removes the property from the Special Flood Hazard Area, the federal flood insurance mandate falls away and lenders treat it as outside the flood zone. Some buyers still discount land that floods visibly or sits next to mapped flood areas, so the recovery is strongest when the site looks and drains like dry ground.

Sometimes, but it is difficult. Grading in a regulatory floodway generally needs an engineered no-rise analysis showing the work won't raise flood levels, and detention placed in the floodway often does not get credit because floodwater already fills it. Many local ordinances prohibit or limit it. A civil engineer and the local floodplain administrator should confirm before you count floodway acreage toward stormwater needs.

No. Without testing, a wet or sinkhole-prone area is an unknown, and buyers price unknowns conservatively. It may limit where buildings, heavy equipment, or paving can go, or require undercutting, stabilization, or setbacks. A geotechnical investigation and, in karst areas, a sinkhole evaluation are the way to replace a discount with a real cost estimate.

A topographic survey shows the drainage pattern, and a civil engineer uses it to locate detention and a legal outfall point. The outfall must discharge into a public storm system, a defined channel, or another approved point, often with easements if it crosses neighboring land. Confirming the outfall early matters, because a site without one may be unable to get a grading permit.

Often, yes. Asphalt paving typically lasts roughly 15 to 25 years with regular sealcoating, crack sealing, and overlays, while many commercial roof membranes are designed for around 20 to 30 years. Heavy truck traffic, poor base, and drainage problems shorten pavement life sharply. On IOS sites, budget reserves for paving, gravel replenishment, and fencing as seriously as you would for a roof.

Start with the recorded document and the title commitment: many restrictions state a fixed term, renewal terms, or who can enforce them. State law also matters, since some states limit how long restrictions last or let courts void them when conditions have changed. A real estate attorney should review the language, and a title insurer may agree to insure over a restriction that is clearly unenforceable.

A deed restriction reduces fee simple value to the extent it blocks the property's highest and best use. A restriction against outdoor storage, truck parking, or heavy industrial use can cut value sharply on an IOS site, while a restriction that matches what zoning already allows may have little effect. Appraisers compare value with and without the restriction, using sales of similarly restricted land where they exist.

It depends on what the easement permits and what it prevents. A buried utility line under a gravel yard may allow parking and storage on top, while a pipeline or transmission corridor can prohibit structures, heavy loads, and grade changes. The value impact is usually concentrated in the encumbered strip, plus any loss of layout efficiency or access across the rest of the site.

Yes. A perpetual easement runs with the land indefinitely, while a term easement eventually expires. An exclusive easement can bar the landowner from using the area, while a non-exclusive easement lets the owner keep using it as long as that doesn't interfere with the holder's rights. Perpetual and exclusive easements generally weigh most heavily on value.

It can. Utility and government easements are often broad, hard to relocate, and backed by condemnation power, so landowners rarely get them released. Private easements, such as a neighbor's access or drainage rights, can sometimes be negotiated, relocated, or released, though only with the holder's agreement. In either case, the recorded terms and the actual use on the ground drive the value impact.

Neither alone. The utility or agency typically makes an offer based on its own appraisal, and the landowner can negotiate or hire an independent appraiser. If no agreement is reached, a court or jury decides just compensation under state eminent domain law. An appraiser's job is to give an opinion of the value lost, including damages to the remaining property, not to set the payment.

Most buyers avoid closing before rezoning unless the price already reflects the risk. An entitlement contingency or extended closing lets the buyer pursue approvals while under contract, and an option does the same for a fee without an obligation to close. Sellers usually want higher deposits or extension fees in exchange for the time, so the choice comes down to how long approvals will take.

Staff usually give an informal read on whether the request fits the comprehensive plan, surrounding uses, and current policy, without committing to an outcome. A pre-application meeting is the best way to learn whether the request is supportable, what conditions may be attached, and which neighbors or officials will weigh in. Treat staff feedback as a signal, since elected officials make the final rezoning decision.

Usually, yes. Most jurisdictions treat dividing land into a new lot as a subdivision, which requires an approved plat or minor subdivision approval before the new parcel can be conveyed or permitted separately. Some offer a simplified lot split or exemption for small divisions. Check the local subdivision regulations early, because a replat can add survey costs and weeks or months to the timeline.

A use becomes legal nonconforming, or grandfathered, when it was lawfully established and the zoning later changed to prohibit it, or setbacks, parking, or lot-size rules tightened. The use can usually continue, but expansion is limited and the right is often lost if the use is discontinued for a set period, commonly six months to a year. Confirm status with a zoning verification letter.

As vacant, the site's highest and best use is whatever current zoning allows a new owner to build, not the grandfathered use. If zoning no longer permits the existing industrial use, the as-vacant value may be lower, or sometimes higher, than its value as improved. The gap between the two analyses shows what the legal nonconforming status is worth and how much risk losing it would carry.

Yes. Under the International Building and Fire Codes, buildings used to store commercial motor vehicles generally require sprinklers when a fire area exceeds 5,000 square feet, and repair garages for those vehicles have a similar trigger. If tenants park work trucks inside, the fire marshal may apply that classification. Confirm occupancy with the local code official before you buy or build, since local amendments vary.

Convert the rent roll to rent per usable acre (or per stall), using the surveyed usable acreage rather than the parcel size. Compare it with current yard rents from local brokers. Rent well above market is a rollover risk; rent well below market is upside, but only if the lease lets you reach it. Confirm the numbers with signed leases, tenant estoppels and payment history.

Ask how long it would take to re-lease the yard if the tenant left. Look at the tenant's business health and how much of the yard it really uses, plus competing yards nearby and how fast they lease. Calls to local brokers and to fleet and contractor users are the quickest check. A short remaining lease in a thin market deserves a lower price or a higher cap rate.

Typically a Phase I environmental site assessment under the ASTM E1527-21 standard, an appraisal, an ALTA/NSPS survey, a title commitment, a zoning verification letter and a flood determination. On leased yards, lenders also want leases and tenant estoppels. Lenders with environmental concerns may require a Phase II. Order these early so the loan commitment lands inside your due-diligence period. See IOS financing.

Every unresolved issue either cuts usable acreage, which lowers income, or adds risk, which raises the cap rate a buyer will accept. Most findings lead to a price retrade, a seller credit, a cure before closing, or walking away. Issues you leave unresolved resurface in the next buyer's diligence, so curing them now usually protects your exit value.