Understanding the Closing and Due Diligence Process

RealAdamMalik
5 min readMar 14, 2022
It’s the last call for alcohol. Pro tip: Choose a realtor that isn’t a half-drunk.

There are 3 Major Inspections you need to do during the closing part of a real estate transaction:

  • Title inspection
  • Document inspection
  • Physical Inspection

When a piece of real estate is sold, a bundle of rights is transferred from one owner to another through what’s known as a deed

Easements and covenants on title are fairly commonplace, whereas a lien on a title is a make or break addition

So a clear title is one that is free of liens, meaning another party has the ability to foreclose on the property

Title Company or Attorney:

  • Title insurance covers financial damage that may be caused by the title

Document inspection:

  • More or less to review depending on the type of property

Seller disclosures:
Seller’s tax returns are a very truth-telling document

Current leases if the property is a current rental property you want to inspect the lease thoroughly because remember that the lease comes right with the property

Current rent roll: list of all current tenants, their rent amount, move-in-date, and lease arm's length

Tenant Estoppel Certificates: a form that existing tenants fill out,

Current year’s tax bills -> be sure to verify that the tax amount you run your numbers with is the actual tax amount

Recent utility bills -> utilities is a potential expense that can transfer over to the new landlord, so make sure to ask for a recent utility bill, or at least call the utility company

Security deposits -> if the property is already rented, make sure you verify the security deposit amount

Recent or current maintenance on the property -> this will help you get a gage on what work needs to actually be done or what work is just being deferred by the owner to make the expenses appear less than they are

HOA documents -> you must review the HOAs declaration of documents, covenants, and restrictions, which are more commonly referred to as the CC and Rs.

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RealAdamMalik

Investor-Friendly Realtor on a mission to help 1000 people attain financial freedom… connect with me here -> linktr.ee/realadammalik