Due diligence is the period between signed purchase agreement and closing during which the buyer verifies everything represented by the seller. Skipping or rushing due diligence is one of the most costly mistakes in real estate investing.
Key due diligence items:
- Physical inspection: Structural, roof, HVAC, plumbing, electrical
- Financial audit: Verify rent rolls, leases, actual expenses, tax returns
- Title search: Confirm clean title, no liens or encumbrances
- Environmental: Phase I assessment for contamination (commercial/multifamily)
- Legal review: Existing leases, pending litigation, zoning compliance
- Market analysis: Confirm rent assumptions against actual comps
Related Terms
As-Is Value
The current market value of a property in its present condition, before any repairs or improvements.
Title Insurance
Insurance protecting the buyer and lender from financial loss due to defects in the property's title.
Escrow
A neutral third-party account holding funds and documents during a real estate transaction until all conditions are met.