As a loan officer, your clients will lean on you for guidance as they navigate complicated real estate transactions.
Like any great loan officer, you want to be able to provide them with accurate, timely, and helpful information. This is particularly important in commercial transactions, due to the sheer size and complexity of these deals.
While there are many things that could cause concerns during a commercial transaction, one of the most common is the condition of the property as it pertains to environmental risks.
The best way to determine risks is to schedule a Phase 1 Environmental Site Assessment (ESA) of the property. Of course, when requesting an ESA, your clients will want to know the cost of a Phase 1 Environmental Site Assessment.
To address your clients’ concerns, it is important to understand Phase 1 ESA cost factors. To help, we’ve outlined the average cost of Phase 1 ESAs below. We’ll also identify key elements that can impact the cost of a Phase 1 site assessment.
Average Cost of Phase 1 Environmental Site Assessments
We know that your time is valuable. That is why we want to get right into the question of the hour before we take a deep dive into specific Phase 1 ESA cost factors.
Typically, the cost of a Phase 1 environmental site assessment ranges from about $1,500 to $6,000. Complex Phase 1 ESAs may exceed that top figure, especially if the property is very large or highly developed.
While your clients may not be too keen on spending a few thousand dollars on a Phase 1 ESA, failing to do so can come back to haunt them (and you). Phase 1 environmental site assessments are designed to protect both the buyers and the financial institutions that provide funding for a commercial real estate transaction.
Modern Phase 1 ESAs can reveal the presence of health and safety concerns on a property. If concerns are discovered, they might influence your client’s decisions. They may lower their bid on a property. They could even decide to withdraw their bid completely.
A Phase 1 environmental site assessment can help your clients to avoid overpaying for a property that will require remediation. Phase 1 ESAs may also protect you and your client from civil liability.
Factors that Influence the Cost of Phase 1 Environmental Site Assessments
The primary factors that influence the cost of Phase 1 environmental site assessments include the following:
1. Property Location
Phase 1 ESA inspectors will need to travel to the property location to perform an assessment. This inspection team will factor the property’s location into their bid. If the subject property is in a rural, difficult-to-access location, expect the Phase 1 environmental site assessment price to be slightly higher.
2. Property Size
A notable factor that influences the cost of a Phase 1 environmental site assessment is the property size. A 5-acre property will be easier to assess than a 20-acre property. However, size alone does not guarantee that a property will be more costly to inspect.
For instance, let’s say that your client is thinking about buying a 5-acre developed property and a 30-acre undeveloped property. In this scenario, the smaller property may cost more to inspect. This is especially true if it has been used for various purposes or contains multiple structures.
3. State of the Property
Speaking of structures, the current state of the property can also have a major impact on the cost of your Phase 1 ESA.
Industrial properties that were once used as gas stations or hazardous waste storage sites will require a thorough inspection. The inspection team must check for the presence of hazardous waste, underground storage tanks, and other items of concern.
During a Phase 1 ESA, the inspectors will also need to examine all buildings. Properties with multiple structures will be more difficult to inspect than ones that don’t have any standing buildings.
4. History of the Property
As part of Phase 1 ESA, inspectors must sort through historical records for a property. If a property has been used for multiple purposes over the years, there will be more records to review. This means that the inspection team will need to allocate extra resources to the research process to promptly complete the assessment.
5. Availability of Records
If a property has been in use for a number of decades, some of the older records may be incomplete, damaged, or even lost. While a skilled Phase 1 ESA team will have experience analyzing partial records, it can be a labor-intensive process, which will drive up the costs.
6. Experience Level of Phase 1 ESA Team
A talented and experienced Phase 1 ESA firm may cost slightly more than the lowest bid. However, they will also perform a more thorough assessment of the property.
Hiring an established assessment agency is an easy call if you want to protect your client’s interests during a commercial real estate transaction. Spending a little more on the front end could save thousands of dollars on legal fees and remediation costs on the back end.
Request a Phase 1 ESA Quote from RSB Environmental
As you can see, many factors will influence the cost of a Phase 1 Environmental Site Assessment. That’s why it’s so important to choose the right firm to perform Phase 1 ESAs for your client’s real estate transaction(s).
The environmental professionals at RSB Environmental can deliver value to your clients by conducting a comprehensive Phase 1 ESA. We offer transparent pricing, prompt reports, and a client-centric approach.
We invite you to request a free Phase 1 Environmental Site Assessment quote or contact our team today to discuss each client’s needs.