Real Estate Due Diligence Checklist: What to Review Before Closing

Real estate due diligence is the structured investigation a buyer conducts between signing a purchase agreement and closing. The due diligence period — typically 15-45 days in residential transactions and 30-90 days in commercial deals — is the buyer's window to discover problems that were not disclosed by the seller, verify that the property is what it was represented to be, and evaluate whether the deal terms are appropriate given what they learn.

Walking away from a deal during the due diligence period costs time and the earnest money for the investigation. Closing without completing due diligence can cost far more — environmental remediation, structural repairs, undisclosed liens, tenant disputes, and zoning violations can transform a sound investment into a financial catastrophe.

This checklist is organized by due diligence category. Not every item applies to every transaction — a vacant land purchase has different requirements than a stabilized multi-tenant office building — but completeness in the applicable categories is the goal.

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Category 1: Title and Survey

The foundation of any real estate due diligence is establishing clear title and understanding the physical boundaries and encumbrances on the property.

Title Review

• [ ] Obtain preliminary title report or title commitment (ALTA form)
• [ ] Review Schedule A for property description accuracy and vesting
• [ ] Review Schedule B-I requirements — identify any requirements that may be difficult to satisfy
• [ ] Review Schedule B-II exceptions:
  • [ ] Map all easements against the survey — do any conflict with intended use?
  • [ ] Obtain and read all CC&R documents referenced as exceptions
  • [ ] Review all judgment and lien exceptions — can they be satisfied from proceeds?
  • [ ] Identify all parties in possession (may have unrecorded rights)
• [ ] Confirm chain of title is complete (no gaps or breaks)
• [ ] In mineral rights states: confirm ownership of mineral rights or understand severance

Survey

• [ ] Order current ALTA/NSPS survey if property is commercial or significant
• [ ] Verify legal description matches deed and title commitment
• [ ] Identify all easements shown on survey — do they match title exceptions?
• [ ] Check for encroachments (structures crossing boundary lines)
• [ ] Confirm access to public road — is there legal, deeded access?
• [ ] Verify acreage matches what was represented
• [ ] Identify all set-back lines and their implications for development

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Category 2: Environmental

For commercial and industrial properties, environmental due diligence is essential. Contamination discovered after closing becomes the buyer's problem under CERCLA and state cleanup laws.

• [ ] Obtain Phase I Environmental Site Assessment (ASTM E1527-21)
  • [ ] Review all Recognized Environmental Conditions (RECs) identified
  • [ ] Determine whether any RECs require Phase II investigation
• [ ] If Phase II required: obtain soil and groundwater sampling results
  • [ ] Are any contaminants above regulatory thresholds?
  • [ ] If contamination exists: obtain remediation cost estimate
  • [ ] Does the contamination affect financing (lender's collateral)?
• [ ] Review regulatory database records for the site and neighboring properties
• [ ] Confirm no underground storage tanks (USTs) on the property — or obtain UST removal documentation if removed
• [ ] For properties with prior industrial use: review historical aerial photos for evidence of prior site activities
• [ ] Confirm FEMA flood zone designation and flood insurance requirements
• [ ] Review any prior environmental assessments or regulatory correspondence for the property

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Category 3: Physical Condition and Improvements

For improved properties, the physical condition determines capital expenditure requirements and affects value.

Property Condition Assessment (PCA)

• [ ] Obtain Property Condition Assessment (ASTM E2018) for commercial properties
  • [ ] Review immediate repair requirements
  • [ ] Review short-term (1-5 year) capital expenditure needs
  • [ ] Identify any code violations
• [ ] For residential properties: obtain licensed home inspection
  • [ ] Structural elements (foundation, framing, roof)
  • [ ] Mechanical systems (HVAC, plumbing, electrical)
  • [ ] Envelope (windows, doors, exterior cladding)
  • [ ] Environmental concerns (asbestos, lead paint, mold)

Building Systems

• [ ] Review age and condition of major mechanical systems (HVAC, elevators, fire suppression)
• [ ] Confirm roof condition and remaining useful life
• [ ] Review electrical system capacity and condition (especially for industrial properties with high power demands)
• [ ] Confirm water and sewer service adequacy for intended use
• [ ] Review parking availability and condition — does it meet zoning requirements?
• [ ] ADA compliance: are any significant accessibility deficiencies present?

Deferred Maintenance

• [ ] Estimate total deferred maintenance capital requirement
• [ ] Determine whether deferred maintenance is reflected in purchase price
• [ ] Negotiate holdbacks or price reductions for documented deficiencies

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Category 4: Zoning and Regulatory

The property's permitted uses, development rights, and regulatory obligations can fundamentally affect its value and your investment thesis.

• [ ] Confirm current zoning classification and permitted uses
• [ ] Verify intended use is permitted by right — or determine variance/special use permit requirements
• [ ] Confirm existing improvements comply with current zoning (setbacks, height, FAR, parking ratios)
  • [ ] If non-conforming: is the non-conformity grandfathered? What triggers loss of grandfathered status?
• [ ] Review any pending zoning changes affecting the property
• [ ] Confirm all required building permits were obtained for improvements
• [ ] Obtain certificate of occupancy (CO) — confirm it covers current use
• [ ] Review any open building permits or outstanding code violations
• [ ] For development projects: confirm density, height, and setback rights match the development program
• [ ] Investigate any historic district or landmark designations
• [ ] Confirm no eminent domain proceedings or condemnation notices affecting the property

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Category 5: Lease Review (Income-Producing Properties)

For properties with tenants, leases are the fundamental value driver. Thorough lease review is the highest-priority due diligence task for income-producing property acquisitions.

Lease Abstracts

For each lease, extract and verify:

• [ ] Tenant name and the entity that actually signed (vs. any guarantor)
• [ ] Commencement and expiration dates (including any options exercised)
• [ ] Base rent and rent escalation schedule
• [ ] Tenant improvement obligations — outstanding landlord TI commitments?
• [ ] Expense structure: gross, NNN, or modified gross? What does tenant pay?
• [ ] Renewal options: terms, notice deadline, rent at renewal
• [ ] Expansion or contraction options
• [ ] Assignment and subletting rights
• [ ] Termination rights — any early termination options held by the tenant?
• [ ] Co-tenancy rights (retail) — does the tenant have below-market rent or termination rights if anchor tenants leave?
• [ ] Personal guarantee: who guaranteed the lease and what is the guarantee scope?

Lease Verification

• [ ] Obtain estoppel certificates from all significant tenants — compare against actual lease terms
• [ ] Confirm no side letters or oral agreements with tenants not reflected in the lease file
• [ ] Verify rent roll against actual lease terms — are represented rents actually in the leases?
• [ ] Review accounts receivable aging — which tenants are behind on rent?
• [ ] Review any pending lease disputes, defaults, or litigation

Tenant Financial Health

• [ ] For significant tenants: obtain financial statements and assess covenant health
• [ ] Review any delinquency history in operating statements
• [ ] Assess probability of renewal for near-term lease expirations

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Category 6: Financial Review

Understanding the actual financial performance of the property is the basis for valuation.

• [ ] Obtain 3 years of audited (or reviewed) operating statements
• [ ] Reconcile reported gross revenues against rent roll and lease abstracts
• [ ] Review expense history by category — are operating expenses consistent with market?
• [ ] Confirm management fees are included and at market rate
• [ ] Review capital expenditure history — what has been spent, and what is deferred?
• [ ] Obtain current rent roll and aging report
• [ ] Verify occupancy levels against rent roll
• [ ] Confirm security deposits held and amount (should match lease requirements)
• [ ] Review any deferred maintenance reserves
• [ ] Confirm property tax assessments and any pending appeals or reassessments
• [ ] Review utility costs — are any utilities included in rent? At what cost?

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Category 7: Legal Review

Legal due diligence addresses the seller's authority to sell, existing litigation, and any agreements that bind the property.

• [ ] Confirm seller has authority to convey title (review entity formation documents, board authorizations)
• [ ] Review any pending or threatened litigation affecting the property
• [ ] Obtain copies of all service contracts — which will survive closing?
  • [ ] Review termination rights in service contracts
  • [ ] Identify any contracts that require third-party consent to assign
• [ ] Review any existing management agreements — termination rights?
• [ ] Confirm no pending condemnation proceedings
• [ ] Review any shared maintenance agreements with neighboring properties
• [ ] Confirm property tax payments current (or understand any payment plan)
• [ ] Identify any special assessments (pending or approved by the municipality)

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Category 8: Insurance Review

• [ ] Obtain copies of all current insurance policies
• [ ] Confirm coverage types and amounts are appropriate for the property and use
• [ ] Review any open insurance claims
• [ ] For casualty risk: confirm property is insurable at acceptable rates (some properties in wildfire, flood, or hurricane zones face availability issues)
• [ ] Confirm terrorism insurance if required by lender or tenants

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Using AI for Real Estate Due Diligence

For portfolio acquisitions or properties with complex lease structures, AI document analysis dramatically compresses due diligence timelines. Upload all leases, the title commitment, Phase I ESA, and operating statements into a collection and ask cross-document questions:

• "Which leases expire in the next 24 months?"
• "Summarize all co-tenancy provisions across the lease portfolio"
• "What are the most significant Schedule B-II title exceptions in this commitment?"
• "What Recognized Environmental Conditions were identified in the Phase I report?"

The Lease Agreement Analyzer extracts key economic terms from any lease — rent, escalations, options, assignment rights — with page citations. The Mortgage Document Analyzer reviews loan documents for the acquisition financing.

Key Real Estate Due Diligence Terms

• Due Diligence: The comprehensive investigation conducted before closing
• Indemnification: Seller's obligation to compensate for undisclosed conditions
• Force Majeure: How extraordinary events affect lease obligations
• Governing Law: Which state's law governs the purchase agreement and related documents

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Upload any real estate document to the Lease Agreement Analyzer or Mortgage Document Analyzer for instant AI analysis with verifiable page citations.