The buyer's investigation of the property before closing.
Due diligence is the buyer's investigation of a property and the seller's representations before closing. It's the structured period during which the buyer verifies every assumption in the deal — property condition, title, income, expenses, leases, environmental, zoning, market — and decides whether to proceed at the contracted price.
Due diligence is where deals get vetted — and where they sometimes die. The buyer enters contract based on initial information; due diligence is the period for verification. On a stabilized multifamily purchase, due diligence typically takes 30–45 days and includes physical inspection of every unit, deep review of T-12 financials, audit of each tenant's lease and rent payment history, environmental assessment, and market analysis to confirm pro forma assumptions.
The investigation breaks into categories. Physical due diligence covers structural, mechanical, electrical, plumbing, roof, parking, life safety — typically performed by third-party engineering firms producing a Property Condition Assessment (PCA). Financial due diligence includes a deep dive into trailing 12 months of operating statements, rent roll audit, lease verification, expense vendor confirmation, and capex history.
Legal due diligence covers title commitment, survey (ALTA), zoning compliance, permitted use confirmation, code violations search, and (on apartments) rent regulation compliance. Environmental due diligence starts with a Phase I Environmental Site Assessment, which reviews historical use and identifies "Recognized Environmental Conditions" (RECs). If RECs are found, a Phase II ESA with soil and water testing may be required.
For investors, due diligence is the buy decision's real test. The Letter of Intent and contract are based on initial information; due diligence either confirms the underwriting or reveals problems that re-cut the price or kill the deal. Sophisticated buyers budget appropriate time and money for diligence — typically 0.5–1.5% of purchase price in third-party costs and 30–60 days of analyst time on a mid-market commercial deal.
| Physical | |
| Property Condition Assessment (PCA) | $5,000–$15,000 |
| Roof inspection report | $1,500 |
| ALTA survey | $3,500–$10,000 |
| Financial | |
| T-12 operating statement | (from seller) |
| T-3 detailed | (from seller) |
| Rent roll + lease audit | (in-house or auditor) |
| Legal | |
| Title commitment + Schedule B review | (included in title insurance cost) |
| Zoning letter / certificate | $500–$2,000 |
| Environmental | |
| Phase I ESA | $2,500–$6,000 |
| Phase II ESA (if needed) | $15,000–$50,000+ |
The buyer's investigation of a property before closing — physical condition, financial performance, title, environmental, zoning, market. The period for verifying every assumption in the underwriting.
Residential: 10–17 days. Small multifamily: 21–30 days. Mid-market commercial: 30–60 days. Institutional: 60–120 days. The buyer typically loses earnest money refundability when DD ends.
A historical and visual assessment of a commercial property to identify potential environmental concerns. Costs $2,500–$6,000. If concerns are identified (Recognized Environmental Conditions or RECs), a Phase II with sampling may be required.
Typically yes, while the inspection / financing contingencies are active. After contingencies expire, the buyer's ability to walk away (without forfeiting earnest money) is much more limited.
Residential: $500–$2,000. Small multifamily: $5,000–$15,000. Mid-market commercial: $30,000–$80,000. Institutional: $100,000+. The buyer pays diligence costs whether the deal closes or not.
Matrix coordinates loan underwriting with the borrower's diligence schedule — so financing isn't the gating item on closing.
