What Does a Record Search with Risk Assessment (RSRA) Cost?

What Does a Record Search with Risk Assessment (RSRA) Cost?

Environmental Due Diligence

Environmental Due Diligence

The Record Search with Risk Assessment (RSRA) cost is $450 in two to three days. It’s a great choice when it comes to doing basic due diligence on a commercial property. There are other types of environmental due diligence such as the Transaction Screen and the Phase I ESA. Both have their advantages and disadvantages. Knowing which product is right for you can save you thousands of dollars. Getting it wrong can cost you tens of thousands of dollars.

Environmental Due Diligence Options:

Phase I ESA:

The Phase I ESA has long been the go-to option for environmental due diligence. It has the advantage of being the best and safest option. By “safe” I’m referring to safety from risk arising from environmental liability which impacts the economic value of a property. A Phase I ESA functions as a limitation to the buyer’s liability through what’s known as the “innocent landowner defense”. The main drawback to the Phase I ESA is the price. At a cost of around $2,000 they raise the transaction costs to refinancing loans, sometimes to the point of making refinancing untenable. There are, however, less expensive options. A comprehensive review of Phase I ESAs can be found by clicking here.

Records Search with Risk Assessment (RSRA):

The Small Business Administration (SBA) invented the RSRA for the purpose of offering a less expensive means of environmental due diligence. RSRAs took on a life of their own and are now used for non-SBA transactions and some of the less involved projects. They are inexpensive and fast but they don’t limit the buyer’s liability from things the previous owner may have done on the property. The scope is limited so it’s possible that certain things don’t come to light when the research is done for the RSRA. In this case, the new owner is liable for the environmental problem. For further reading, click here and read about everything you need to know about RSRAs.

Environmental Screen:

If you want very fast answers at a very high level regarding the environmental issues with a property you are thinking about buying, there’s a solution for you. For $59 and a 2 hour turn around you can get a back-of-the-envelope idea of what’s going on with a commercial property. Sometimes, this is all you need to sort out if you want to continue with a purchase of a company or property. For the advantages and limitations of environmental screens, click here.

Which Option is Right for You?

Most of the time a bank will tell you what they need in order for you to get a loan. If you’re an all-cash buyer, you’ll need to think long and hard about the risks and benefits of each option. You might be risk averse, or the property may have had automotive, plating or dry-cleaning near it, you’ll probably want a Phase I ESA. If you have a hunch that nothing exciting ever happened on the property you can probably do a RSRA. If you’re just kicking the tires and want to know how much trouble a particular property might cause you should you try to purchase it, the environmental screen is what you want. Read about how the RSRA is becoming the new Phase I ESA.