How Technology Enhances Pre-Purchase Inspections
Only by leveraging new technologies like mobile apps, cloud storage and automated reporting can inspections deliver real value to buyers, sellers and lenders.
Real estate purchases should never be made lightly. The more substantial the investment, the more critical it is to make sure that everything is as advertised. Nobody wants to discover post-purchase that their newly acquired property needs significant work they hadn’t planned for, with associated costs that should have been calculated prior to making a deal. For this reason, due diligence walks—thorough physical inspections performed before the final paperwork is signed—are a standard component of just about every real estate transaction.
These inspections must be detailed and comprehensive, and they usually take place when a potential deal is at its most pivotal, as both parties work to agree on a bid that is acceptable to all sides. Despite the crucial role that they play, most inspections are performed using outdated methods that move slowly, gather less detailed evidence and sometimes make a data-based approach to due diligence nearly impossible. Only by leveraging new technologies like mobile apps, cloud storage and automated reporting can inspections deliver real value to buyers, sellers and lenders.
TIME IS OF THE ESSENCE
Real estate deals are often very fast-paced and high-pressure, especially in the final stages, and sellers will always leverage the tension buyers feel between closing a deal quickly and making sure they pay a fair price. While it’s never a good idea to buy a property without knowing its maintenance and renovation needs, a competitive market can lead to just that outcome, especially because so many inspections are still performed using paper-based checklists that by their very nature slow down or even forestall analytics, and are often not detailed enough to catch all the necessary renovations that will be required post-purchase. As the buyer often only has a short window (30 days or so) to complete the purchase before losing their deposit, it is critical to make these inspections as accurate and efficient as possible.
Mobile technology has streamlined and sped up nearly every walk of life, and due diligence walks are no exception. Mobile inspections speed up the process by making it easy for property professionals to take advantage of mobile forms customized to each unit’s layout and to easily add photography all within one integrated application. And because mobile platforms provide real-time data, property executives and lenders get the business intelligence they need to make informed decisions as quickly as the inspectors finish walking each unit.
Comprehensive evidence is a must-have when estimating capital budgets and repair costs for a new property. Buyers must present proof of any areas that need to be upgraded so they can factor the cost of renovations and repairs into their bid and their capital budgets. Photographs are the most reliable tool to document the state of a property, but paper and spreadsheet-based platforms make taking pictures a chore—and actually using them in a compressed timeframe a real challenge. Too often, inspectors who use spreadsheets and paper checklists take pictures with their own phones or cameras, and have no standardized and reliable means of associating those photos with the correct unit or even the right building. Labeling and sorting these images against each unit takes time that buyers often don’t have in the hectic final stages of a purchase.
Mobile platforms leverage the power of smartphones and tablets to include photography. The inspector simply selects a line item and takes a picture, and that picture is automatically associated with the item and its respective unit. Maintenance concerns can be logged immediately, letting buyers see inspection results in real time and get immediate access to information about the state of a property.
Perhaps the biggest problem with traditional walkthroughs is how unwieldy—if not impossible—they make gathering data for analytics in a reasonable amount of time. A mobile platform speeds up the inspection process itself, but for many organizations, the bulk of the due diligence process is devoted to collating, organizing and dissecting the available information into actionable data that can influence the negotiation process and bid price and accurately inform the renovation budget required post-sale, including providing key information as to what capital improvements (kitchen upgrades, carpet replacement, etc.) can be performed post acquisition to best impact rents and ROI.
Digital platforms automate many of the data entry, collation, and preparation processes required to crunch the numbers, so an analytics process which once took days using a paper-based inspection process can now be done in hours, and much more comprehensively and accurately.
Mobile technologies facilitate standardized data collection. All inspection results can then be automatically collated and organized by unit for immediate use in analytics, effectively eliminating any need for data entry. Once an inspection is complete, all data is automatically uploaded to and stored in the cloud for easy access. Multiple inspectors working in tandem can finish a walkthrough quickly, allowing the analytics process to begin immediately or potentially even during the walkthrough itself.
WORK FASTER AND SMARTER
Due diligence walkthroughs are a must for real estate transactions. It is vital to find workflow tools that meet or exceed industry best practices and take advantage of new technologies like mobile platforms, photography and data analytics. This way, buyers can dramatically increase the speed and precision of their due diligence inspections to make smarter bids and produce more accurate renovation budgets that consider market factors as well as the property’s state of repair—and to make them quickly enough to get the best possible terms.