Due Diligence Checklist
Due diligence in real estate is the investigation and verification process a buyer performs before completing a purchase. A thorough due diligence period protects against buying properties with hidden problems. The checklist below covers the major items investors should verify during due diligence.
Title and legal
Order a title search to identify liens, encumbrances, and ownership history. Verify legal description matches what you think you are buying. Check for open permits, code violations, and HOA compliance. Review easements and setback compliance. Confirm the seller has authority to sell.
Physical condition
Get a professional home inspection. Check roof age and condition. Inspect foundation. Evaluate HVAC, plumbing, and electrical systems. Look for water damage, mold, and termite damage. Assess lead paint risk (pre-1978 homes). Check for asbestos. Test for radon.
Financial
Verify property tax amounts and any delinquencies. Confirm assessed value. Check insurance availability and cost (especially in flood zones). If occupied, verify rent roll with estoppel certificates. Review utility costs. Calculate all closing costs.
Market
Run comparable sales for ARV. Run rent comps for ARR. Check days on market for your property type. Review zoning for permitted uses. Research planned development or infrastructure changes in the area.
Deal killers to watch for
Foundation issues exceeding $20,000+, environmental contamination, uninsurable properties, unresolved title disputes, zoning violations preventing intended use, flood zone with no insurance available, and structural damage requiring engineering.