Real Estate Due Diligence Checklist

Insights – Real Estate Due Diligence Checklist | 8 min read | September 20, 2024

Purpose: The Real Estate Due Diligence Checklist is designed to guide potential property buyers through a comprehensive evaluation process before finalizing a real estate transaction.

Download this Real Estate Due Diligence Checklist below!

Section	Item	Action Steps
1. Property Information	Address and Legal Description	Verify the exact address and obtain the legal description of the property.
	Property Type	Identify whether it’s residential, commercial, industrial, or land.
	Current Use and Occupancy	Understand how the property is currently being used and if it’s occupied.
	Zoning and Land Use	Confirm zoning classification and permitted uses; check for any zoning changes or variances.
2. Title and Ownership	Title Search	Obtain a title report or commitment from a reputable title company.
	Chain of Title	Review historical ownership to identify any irregularities.
	Liens and Encumbrances	Check for mortgages, liens, judgments, or unpaid taxes.
	Easements and Restrictions	Identify any easements, covenants, or restrictions that affect the property.
	Seller’s Authority	Verify that the seller has the legal right to sell the property.
3. Physical Inspection	General Property Condition	Conduct a thorough walk-through inspection.
	Structural Integrity	Hire a professional to inspect the foundation, roof, walls, and structural components.
	Mechanical Systems	Inspect HVAC, plumbing, and electrical systems.
	Pest and Termite Inspection	Check for infestations or damage from pests.
	Environmental Hazards	Test for asbestos, lead-based paint, radon, mold, and other hazardous materials.
	Land Survey	Obtain a survey to confirm property boundaries and identify encroachments.
	Flood and Natural Hazard Zones	Determine if the property is in a flood plain or other hazard area.
	Soil and Geotechnical Tests	Conduct tests if planning construction or if soil stability is a concern.
4. Financial Analysis	Purchase Price Verification	Ensure the price aligns with market value.
	Comparable Market Analysis	Review recent sales of similar properties in the area.
	Income and Expense Statements (For Investment Properties)	Analyze current income streams and operating expenses.
	Rent Rolls and Leases	Examine existing leases, terms, and tenant payment histories.
	Property Taxes	Review current tax bills and assess potential changes.
	Insurance Costs	Obtain quotes for property insurance and understand coverage needs.
	Utility Bills	Review past utility costs for budgeting purposes.
5. Legal and Regulatory Compliance	Building Codes and Permits	Verify compliance with local building codes; confirm all necessary permits were obtained for renovations or additions.
	Pending Legal Actions	Check for lawsuits, code violations, or other legal issues.
	Historic Designations	Determine if the property has any historic status affecting renovations or usage.
6. Contracts and Agreements	Service Contracts	Review any existing contracts for maintenance, security, or other services.
	Warranties	Obtain warranties for appliances, equipment, or construction work.
	Homeowners Association (HOA) Documents (If Applicable)	Review CC&Rs, bylaws, financials, and meeting minutes; assess any current or upcoming special assessments.
7. Appraisal and Valuation	Professional Appraisal	Hire a certified appraiser to determine the property’s fair market value.
	Market Trends	Analyze local real estate trends and future projections.
8. Environmental Assessments	Phase I Environmental Site Assessment	Identify potential or existing environmental contamination liabilities.
	Phase II Assessment (If Required)	Conduct further testing if Phase I indicates potential issues.
	Wetland and Wildlife Considerations	Check for protected species or wetlands that may restrict development.
9. Insurance	Property Insurance	Ensure the property is insurable and identify any potential issues.
	Claims History	Review any past insurance claims made on the property.
10. Financing	Mortgage Pre-Approval	Secure financing and understand loan terms.
	Financing Contingencies	Include contingencies in the purchase agreement related to financing approval.
11. Tax Considerations	Tax Assessments	Understand current and projected property taxes.
	Transfer Taxes and Fees	Calculate any taxes or fees due at closing.
	Consult a Tax Professional	Assess tax implications of the purchase and ownership.
12. Closing Documentation	Purchase Agreement Review	Carefully review all terms and conditions.
	Closing Costs	Obtain a detailed list of all closing costs.
	Funds Verification	Ensure you have the necessary funds for down payment and closing costs.
	Title Insurance	Purchase a title insurance policy to protect against future claims.
13. Final Walk-Through	Property Condition Verification	Ensure the property is in agreed-upon condition.
	Repairs Completion	Confirm that any negotiated repairs have been completed satisfactorily.
14. Post-Closing Actions	Recording of Deed	Ensure the deed is properly recorded with the local government.
	Transfer Utilities and Services	Arrange for the transfer of utilities into your name.
	Change of Ownership Notifications	Notify HOA, insurance companies, and other relevant parties of the ownership change.
15. Professional Consultations	Real Estate Attorney	Have an attorney review all legal documents.
	Accountant or Financial Advisor	Discuss financial implications and investment strategy.
	Property Manager (If Applicable)	Consult about managing rental properties.
16. Additional Considerations	Future Development Plans	Investigate any planned developments nearby that could affect property value.
	Community and Neighborhood Analysis	Assess local amenities, schools, crime rates, and quality of life.
	Access and Transportation	Consider proximity to major roads, public transportation, and accessibility.
	Personal Property Inclusions	Document any fixtures, appliances, or personal property included in the sale.

Frequently Asked Questions (FAQs)

Q1. What is Real Estate Due Diligence?

A: Real estate due diligence is a comprehensive appraisal of a property’s physical, legal, and financial conditions before finalizing a purchase. It helps buyers identify potential issues that could affect the property’s value or usability.

Q2. Why is Due Diligence Important in Real Estate Transactions?

A: Due diligence minimizes risks by uncovering hidden problems, ensuring legal compliance, and confirming that the investment aligns with your goals. It protects you from unforeseen liabilities and costly surprises after purchase.

Q3. How Long Does the Due Diligence Process Take?

A: The duration varies depending on the property’s complexity but typically ranges from 15 to 60 days. The timeframe is often specified in the purchase agreement.

Q4. Who Should Be Involved in the Due Diligence Process?

A: Professionals such as real estate agents, attorneys, inspectors, appraisers, environmental consultants, and financial advisors should be involved to ensure a thorough evaluation.

Q5. What Documents Are Essential During Due Diligence?

A: Essential documents include title reports, property surveys, zoning certificates, building permits, financial statements, lease agreements, service contracts, insurance policies, and HOA documents if applicable.

Q6. Can I Conduct Due Diligence Myself?

A: While you can perform preliminary checks, it’s advisable to engage professionals for legal, structural, and financial assessments to ensure nothing is overlooked.

7-Step Guide to Buying a House in Uganda

Aug 08, 2024

7 simple steps to buying a house in Uganda with expert advice, recommendations, and tips to make the process smoot ...

load articles

Featured Insights

Testimonials

“The TLG Living Group delivered on my high-expectations and I would highly recommend their Bukoto Living project to anyone who is in the market to buy a home or make a real estate investment in Kampala."

“I would highly recommend TLG as a property developer to anyone who is in the market to buy a modern property in Kampala.“

Azmi Anees

Azmi, with a passion for storytelling, has extensive experience in developing informative content on real estate, finance, technology, education, and lifestyle.

Get in Touch

Connect with TLG expert.

Register

Reset Password