Due Diligence Real Estate: What It Is and What to Check
Due diligence real estate refers to the investigation and verification process a buyer conducts after a purchase contract is signed but before closing. The due diligence period — typically 7–21 days in most US markets — gives you the legal right to inspect the property, review documents, and exit the contract without penalty if something material is discovered. Knowing what is due diligence in real estate and what to actually check during that window protects you from expensive surprises after transfer.
This guide covers what is due diligence in real estate specifically — what documents and inspections it covers — how to read a real estate net sheet to understand your closing costs, how lock box real estate access works during the due diligence period, and what blue water real estate means in context.
What Due Diligence Real Estate Actually Covers
Due diligence real estate covers physical inspections, document review, and financial verification. The physical inspection is the most familiar: a licensed home inspector evaluates the structure, systems, and major components of the property and produces a written report within 24–48 hours of the inspection. Beyond the general inspection, due diligence real estate commonly includes: pest and wood-destroying organism inspection, radon testing (in affected regions), sewer scope, roof inspection, and HVAC system evaluation.
Document review during due diligence covers title commitment (verifying no undisclosed liens or easements), HOA documents (if applicable — CC&Rs, financial statements, meeting minutes), seller disclosure forms, and property survey. Each of these documents can reveal deal-altering information. A title commitment showing a mechanic’s lien from unpaid contractor work stops a deal cold until the lien is resolved.
What is due diligence in real estate on the financial side: verify that the property’s income (if a rental) matches what was represented, review 12 months of operating expenses, confirm insurance availability and cost (particularly in flood or wildfire zones), and request a real estate net sheet from your agent that projects your total acquisition cost including all closing items.
Real Estate Net Sheet, Lock Box Real Estate, and Blue Water Real Estate
A real estate net sheet is a document your agent or the listing agent prepares that estimates the seller’s net proceeds or the buyer’s total costs at different purchase prices. As a buyer, request a real estate net sheet that itemizes loan origination costs, title insurance, escrow fees, prepaid items, and any credits from seller concessions. This is how you calculate your true all-in cost, not just the purchase price.
Lock box real estate refers to the electronic key box attached to a property that allows authorized agents to access the property for showings. During due diligence real estate, your agent uses a lock box to coordinate inspector access even when you’re not present. Most lock boxes now log every access event electronically — your agent can confirm that inspectors actually entered the property.
Blue water real estate is an industry term for oceanfront or waterfront properties with direct, unobstructed water access — “blue water” meaning open navigable water rather than a canal or lagoon. Due diligence real estate on blue water properties adds specific items: seawall inspection, dock permits verification, flood zone certification, and marine environmental reports.