How often do multiple buyers get an environmental report (Phase 1) for the same CRE property?
CRE sales people: I'm trying to track down how common it is that multiple buyers commission a Phase 1 for the same piece of property. For example, Buyer A commissions a Phase 1, then walks away from the deal (for whatever reason), then Buyer B comes along and commissions another Phase 1. 

Is this a common occurrence or does it happen rarely?
[{"id": "hubz1wk", "text": "After you enter into the PSA and start conducting due diligence you order the phase I. You don't spend money on due diligence consultants until you are under contract. Maybe on an architect yield study to figure out what you can pay. If you intend to get a loan you will need your own Phase I. So if the seller has a Phase I you will need to pay to get it updated with your name on it.  If you back out of the PSA than the next guy will need to order his own or get the old study updated.", "replies": [{"id": "hud5qv3", "text": "If you back out of the PSA, how does the next buyer know to get the old study updated? Does the seller put them in touch because he knows the original buyer already has one?", "replies": [{"id": "hud7hw8", "text": "Sometimes the seller has one that they provide as part of DD package and you can pay $1000 to change the date and put your name on it. If the buyer ordered one while under contract and then backs out that is their report to keep and they have no obligation to share it. But if the next guy knows there was one previously done by a specfic firm you can get a deal.", "replies": [{"id": "hudb2zi", "text": "Makes sense. I'm trying to figure out if there is room in the market for an online marketplace for Phase 1s (or other diligence materials). E.g., if you drop out of PSA and have a useless Phase 1 on your hands, post it to the \"eBay of Phase 1s\" and recoup some cost. If you're a buyer in the market, you could check if a recent Phase 1 is already available so you could get it faster/cheaper and just get it reissued by the consultant who prepared it originally. Does this idea have legs?", "replies": [{"id": "hudcsf3", "text": "Seems really niche. Seems very hard to track this kind of information down and even then it\u2019s only marginally helpful to lower DD costs if you are the second buyer coming in after it fell out of contract with another buyer.", "replies": [{"id": "hudtyib", "text": "Good point about not lowering DD costs enough. Wouldn't having the information faster be valuable though?", "replies": [{"id": "huduoig", "text": "Maybe, but developers are old school and I think you\u2019ll have a hard time getting them to think to go to your DD site first on the off chance that it has a phase I for cheap. You could have thousands of them on file and only cover .00001% of land sites in the US.", "replies": [{"id": "hudwymu", "text": "I agree, this is perhaps the fatal flaw. You would need developers to adopt a new behavior (uploading and downloading DD). Of course, overtime, there's no reason this couldn't scale to hundreds of millions of properties. For example, every listing in CoStar could have a data dump of all previously conducted DD.", "replies": [{"id": "hudxwmt", "text": "That\u2019s a common business model in prop tech, build a big enough dataset here and costar will either buy you or try to sue you into oblivion. Just have to hope it\u2019s the former, not the latter.", "replies": [{"id": "huef0qo", "text": "Yeah, that definitely seems to be a limiting factor. Fundamentally, all property information/data boils down to the address or parcel, and Costar controls the lynchpin in that market, so either you need unlimited capital or sellout to them.", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "hudf86r", "text": "No it does not have legs. Consultants get paid to produce for one client, not all clients. The study can only be legally relied upon by it's owner, so consultants would just refuse to provide updates reliance letters. Phase 1 Reports aren't that expensive.", "replies": [{"id": "huds7kv", "text": "Right, but if a new buyer is interested in the property, the likelihood that the new buyer uses the same consultant is very low (so the original consultant just gets paid once). However, if the new buyer sees an existing report from that consultant available, the consultant can get more revenue for work already done by charging for the reliance letter. It would reduce the production of redundant reports (bad for consultants), but increase the revenue from each report produced (much better for consultants).", "replies": [{"id": "hudtcz9", "text": "You're talking small sums of money relative to massive legal and professional liability.", "replies": [{"id": "huduw2y", "text": "I can see how the lender/buyer might not want to trust a consultant they didn't hire directly (unless highly reputable, national firm), but the consultant's liability would be the same no matter who the ultimate buyer is - they stand by their work either way.", "replies": [{"id": "hudwyz0", "text": "They absolutely do not. If the report is not addressed to you, they are not beholden to you. That would open them up to unlimited liability.", "replies": [{"id": "hueczy5", "text": "Right, but if the buyer that pays for the stale report paid the consultant for a reliance letter or an update/refresh of the report to bring it current, why would their liability exposure be any different from one buyer to the next?", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "hudhad7", "text": "Online marketplace for appraisals and title would be a broader market. The fact is, this is no different than trying to bring your own credit report into a bank for financing. They want to order their own to avoid fraud and engage directly with their experts (appraisal, title, environmental, flood, etc.)", "replies": [{"id": "hudt7y5", "text": "Is the market for those items larger just because they are more common? For large developers, I've heard that the Phase 1 can take the longest and be the most expensive part, so I'm starting my research there. The marketplace model could extend to every DD work product. While the DD likely wouldn't be accepted by a lender, it could essentially move 80% of the DD prior to entering a PSA. Does that make sense?", "replies": [{"id": "hudtzm1", "text": "Yes, appraisals and title needed on just about every transaction, phase 1 on very limited situations overall. Phase 1 is generally not expensive on a typical CRE deal, $1,500 in my market while appraisals on CRE $3,000-$5,000+\nThey both take 3-4 weeks generally speaking. If it isn\u2019t acceptable to the lender it isn\u2019t marketable. Who wants to pay twice when financing is contingent on it anyways. I don\u2019t personally see a market for your concept.", "replies": [{"id": "hudvl29", "text": "This is super helpful information, thanks.", "replies": [{"id": "hug1lz6", "text": "On commercial transactions those costs are negligible compared to legal and origination fees.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "hudlwho", "text": "Lenders also have their specific list of qualified environmental companies.", "replies": [], "depth": 5}, {"id": "hudrbs0", "text": "Phase 1s are only useful for 180 days after inspection. Lenders will require custom language. Old phase 1s are essentially worthless.", "replies": [{"id": "hudv9kr", "text": "This is exactly what I'm interested in unlocking. Old Phase 1s are worthless for shifting liability (the primary purpose), but they are still highly relevant data about the attributes of a property. If a developer could access that data (even stale) upfront, they can make decisions more quickly.", "replies": [{"id": "hug0mpn", "text": "I\u2019m not sure why a buyer would willing give away a copy of the DD it paid for to unknown third parties. Also, many contracts contain confidentiality provisions that prohibit a buyer from disclosing its DD to any third party. Sellers want to control public information about their property and might sue a website that publicly posted proprietary information about their property.", "replies": [{"id": "huiovo0", "text": "The buyer wouldn't be giving it away, they'd be selling it, which is something that already happens when buyers walk away from a deal - they sell DD to the next buyer if they are approached for it. The information wouldn't be public, but available for purchase.", "replies": [{"id": "huiqd2x", "text": "Understood but most buyers don\u2019t have the right to sell it or disclose it per the second part of my comment. So, it\u2019s going to be cumbersome to get the seller to agree to release the buyer from the confidentiality clause so that the buyer can sell it. The seller will have little incentive to help a buyer that walked away from the deal.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "huepzru", "text": "Most lenders just want a phase one conducted within 12 months. I don\u2019t think they care which potential buyer ordered it. After 12 months they may accept a reliance letter.", "replies": [], "depth": 2}], "depth": 1}, {"id": "huc68y8", "text": "You can just have the original phase I from the previous buyer recertified for the new buyer. Saves everyone time and money", "replies": [{"id": "huc8bua", "text": "None of my clients will agree to this unless it\u2019s a maximum of 3 years old report.", "replies": [{"id": "huc8pqt", "text": "Right but if you have one buyer that completes a phase I and drops the deal it\u2019s probably within the last 3 years so you can get it recertified otherwise yes it\u2019s common for a buyer to want to complete their own phase I", "replies": [], "depth": 3}, {"id": "hud6uvt", "text": "Would you clients ever consider buying a Phase 1 more than 3 years old if they could have it in hand prior to entering PSA? For example, during site selection, would a buyer consider paying a few hundred bucks to get a 5 year old Phase 1 in hand immediately? Even if you still need a new one for the lender, you could mitigate some of the risk of uncovering something during diligence, right?", "replies": [{"id": "hud7ld8", "text": "No, they won\u2019t. \n\nAll my clients have 60-75 day DD periods + 150 day Approval Periods + extensions. \n\nIt\u2019s just part of their pre-con teams process, no matter how annoying it is and how much time they could potentially save.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "hud58ix", "text": "How does this usually take place? Does the seller tell the next buyer that a Phase 1 has already been done and should buy it to get it re-certified?", "replies": [{"id": "hud8mjt", "text": "This is a question for the next buyer's lender.  A \"recertification\" is going to query all the same databases but most lenders will want the phase 1 addressed to the them specifically inorder to rely on it for an innocence landowner defense if they have to enter chain of title and something comes up later.", "replies": [], "depth": 3}, {"id": "hudgqpz", "text": "Only if it proves the property was clean, and the seller was notified of that, in that case the seller may push the name of the environmental firm that did the report to the new buyer to pursue if the lender will accept it.", "replies": [], "depth": 3}, {"id": "hudu5nd", "text": "The seller retains a copy of the phase I done by the previous buyer. You then email that company and say there is a new buyer and ask the cost to have it recertified in the new buyers name it\u2019s usually a small fee", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "huc6m8o", "text": "Phase 1s are primarily record searches so the shouldn't \"find\" anything different. Unless buyer 1 was trying to close really quickly it would shock me that they engaged and \"started\" a phase 1 then backed out of the transaction.\n\nMore likely buyer A has phase 1 done for his lender, sells in a few years and new buyer needs a new phase 1 for his lender.", "replies": [], "depth": 1}, {"id": "hucbxhf", "text": "Very rare unless you are dealing with a crappy seller. A buyer would only drop out if the Phase 1 discovered some issues that requires a phase 2 report or remediation. At this point the seller should request to buy the phase 1 issues to disclose to other buyers or work on remediation so the property can be sold and financed with a conventional loan. \nA crappy seller would hire a new broker and push to try to close without due diligence.", "replies": [], "depth": 1}, {"id": "hud1brv", "text": "Always get a Phase 1! You will do it during the due diligence period after you have a signed PSA.", "replies": [], "depth": 1}, {"id": "hud9c8o", "text": "In my experience it's the lender that wants a Phase I. Also if one buyer, goes into contract and then drops out, after the Phase I is performed, it is often possible to get access to that  prior Phase I report. But sometimes there are caveats that the report is **only good for the client who ordered it**. Be sure to read the fine print before you pay. Also though Phase II are expensive, if the property has been used to store hazardous waste, or has serious contamination issues of other kinds a Phase II is pretty standard. Again, in my experience, it's the lender who says if it is required.", "replies": [{"id": "huda8fr", "text": "Makes sense. What I'm trying to understand is how the next buyer gets access to that prior Phase 1. That is, how would the next buyer know try and get access to it?", "replies": [{"id": "huddd01", "text": "The seller or sellers broker would have to tell the new buyer that a phase I was done and refer the buyer to whoever completed that phase I to have it updated. They generally wouldn\u2019t do that if the phase I came back \u201cdirty\u201d", "replies": [], "depth": 3}, {"id": "hudgbbr", "text": "They don\u2019t, they are separate transactions. If there is financing, most lenders want to engage the Environmental company directly at the borrower\u2019s cost to reimburse and the data is \u201cowned\u201d by the lender. If the buyer pulled out of the deal it\u2019s likely there is an environmental issue and the seller and bank don\u2019t want to be the ones encouraging access to that info.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hudgyuy", "text": "I remember going along on a phase 1 study for a billboard easement one really hot and sticky day.  All concrete except for a little 6 inch sliver.  Owner of surrounding parcel didn\u2019t want us there/was always trying to cancel our lease.  All manner of bizarre threats about how he\u2019s going to erect airborne planters and put bamboo in them to block the billboard, etc.  There were dogs, there were homeless bums, there were rusted out cars to climb over and have towed.  And I\u2019m doing all this in a fucking shirt and tie.  Think I wound up with $12k off that deal.", "replies": [], "depth": 1}, {"id": "hudk8zu", "text": "In the PSA contracts I work with there is an option for the landlord to receive any of the results from due diligence assessments that were done on the property. In this case if everything went fine I wouldn\u2019t see why the seller would just send the most recent phase 1 unless there is a serious liability that the buyer would be assuming.", "replies": [], "depth": 1}, {"id": "hudksk8", "text": "In my experience you want a phase 1 from a consultant you trust that will guide you if you move forward. I have a select go to guys and depending on location they give me a lot more info than just the phase 1 while preparing the phase 1. If you are in an area that traditionally has a lot of potential environmental risks, like urban dense areas or areas previously developed for decades you will most likely get a few hits\u2026. You want a consultant that\u2019s going to say here\u2019s the phase one\u2026. Here\u2019s my thoughts on these potential issues and how we\u2019ve mitigated them before. I would never buy someone else\u2019s phase 1, unless it was from one of my select few.", "replies": [], "depth": 1}, {"id": "hudtwig", "text": "Any buyer that is at least somewhat sophisticated will order their own phase 1.", "replies": [], "depth": 1}, {"id": "hudwbcz", "text": "Phase Is are a good idea generally but are necessary if financing. Either (i) the property had visible enviro risks that needed to be reviewed or (ii) buyers were financing. \n\nMaybe Buyer B could have gotten a reliance letter from consultant based on prior buyer's Phase I but the prior buyer does technically \"own\" that report and its not like something one buyer pays for is communal property (and buyers are unlikely to share with Sellers for that reason... did Buyer A share?). Typically its a I paid for it so its mine situation. If you want to use it for your deal... you need to pay me for it.  Sellers or Brokers can coordinate that and typically a Buyer will be glad to recoup dead deal costs.\n\nAlso, a bank will not use an old Phase I and will likely need a reliance letter which means I think the consultant needs the other buyer's blessing??? Ill find out tomorrow. I am curious!\n\n\\*\\*\\*\\*Also, buyers/investors out there... I need more feedback on my pipeline tool I built for my business... [Pline Pipeline Invite - Test Company](https://www.pline.ai/invite?group-id=6175f6d6-e831-4593-b926-a15debe84923&amp;nonce=oUQp8k_DlzCl1KN--XBp6CGgYSs&amp;expiry=1643336933605&amp;mac=969ef7dd1237f81c2ca4e13f23448960df6666382430f57818446e47f2a9fe2c)", "replies": [], "depth": 1}, {"id": "hue0dks", "text": "Our lenders drive the process for 3rd parties such as the Environmental, PCA and Appraisal. Sometimes we may receive a fairly recent Phase I from a seller that we push to the lender for approval on the vendor and if we can either keep as is or get a cheaper update. We use this knowledge to affirmatively sign on any environmental indemnity forms.\n\nHowever, I've gotten excited on deals before and started to get my own 3rd parties without the lender's input and it didn't land well. In fact, the vendors I chose were not on their list and they let me know very quickly that I could pay for a Phase I and PCA but they would order again from their list of approved vendors.. and I would pay for it. Lesson learned. So we take their lead when we sign the term sheet and send in our deposit for 3rd parties.\n\nI guess my point is, yes, it's possible a buyer purchased a Phase I before a lender was involved and thereafter walked away from a deal.. And another buyer comes along to purchase a different PCA. But in my experience the process is different and the lender drives the vendor and 3rd party report decisions. Phase I comes during a time where there has been quite an amount of other risk capital in terms of attorney fees, lender deposits, 3rd party fees, etc. so backing out has bigger monetary implications than just walking away from a $3500 phase I report.\n\nWe've also been involved in a deal where a buyer fell out of our sales transaction during DD because they couldn't raise the equity. We purchased their CBRE reports from them at cost.", "replies": [], "depth": 1}, {"id": "huejmz7", "text": "Depends on the lender. If the company that executed survey A is not on the approved list of buyer B\u2019s lender they would have to order a new one. Other scenarios might require it done but this is probably the most common one.", "replies": [], "depth": 1}]