A no-fluff weekly briefing for people who own, manage, and broker commercial real estate. Written by a guy who does all three.
Last week I gave you the lease LOI checklist. This week is the other side of the table: you're buying, or you're listing and want to be ready for the buyer who is.
Here's the part nobody likes to hear. Due diligence isn't paperwork. It's the one window where you can still change the price, change the terms, or walk away for the cost of a deposit. After the deposit goes hard, you're mostly just finding out what you bought.
I run the same 20 items whether I'm representing a buyer or getting a listing ready. Sellers: if you can answer these before a buyer asks, you control the timeline.
1 to 6: Title, legal, and the building itself
1. Title commitment and exceptions. Order it early. Read every exception, then pull the underlying documents. Easements and old agreements hide here.
2. Survey. Boundaries, encroachments, access, flood zone. Make sure the survey matches the title legal description.
3. Zoning and permitted use. Confirm the current use is allowed. Ask what happens if the building is damaged: can it be rebuilt as it is?
4. Permits, violations, and open items. Open permits, code violations, unfinished work.
5. Environmental. Phase I at minimum. Gas stations, dry cleaners, old tanks and neighboring sites are the usual flags.
6. Physical condition. Roof, structure, HVAC, parking lot, plumbing, ADA. Get a property condition report and a quote on anything big.
7 to 12: Income and leases
7. Rent roll versus the leases. Read what's actually signed, not the summary. Rent, term, and dates should tie out.
8. Read every lease. Options, exclusives, co-tenancy, purchase rights, rights of first refusal, assignment and termination rights.
9. Estoppels and SNDAs. Have each tenant confirm their rent, deposit, term, and that there are no side deals or disputes.
10. Operating statements. T-12 and the last three years. Look for what changed and why.
11. CAM reconciliations. What was billed, what was collected, what's capped, and what the landlord can't recover.
12. Delinquencies, deposits, and prepaid rent. Who's behind, who's about to be, and what gets credited at closing.
13 to 16: Expenses and obligations
13. Property taxes. Current assessment, and how the county handles it after a sale. Don't underwrite last year's number blind.
14. Insurance. Loss runs, and get a quote before the deposit goes hard. Premiums have been a surprise for a lot of buyers.
15. Service contracts. What transfers, what must be terminated, and the cost to get out.
16. Capital and tenant obligations. Deferred maintenance, and any TI, free rent, or leasing commissions the seller owes that become your problem.
17 to 20: Value, money, and the calendar
17. Market check. In-place rents versus market. Sale comps. Then compare the cap rate to the 10-year Treasury. If you're not being paid for the risk, say so. This is the idea behind the Deal Meter on The Build.
18. Financing. Know the lender's requirements and timeline early: appraisal, environmental, reserves, and any approvals.
19. Management and transition. Who runs it today, what's in their contract, and what changes on day one.
20. Deadlines. Put every date on one calendar: feasibility expiration, deposit going hard, extension rights, financing contingency, closing. Missing one of these costs real money.
If you only get five things right: the title exceptions, the estoppels against the rent roll, environmental, the T-12 versus real taxes and insurance, and the deadline calendar.
Watch The Build with Robert and see what we're building at creroom.com and on YouTube @TroyMuljat.
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Troy
Educational content only, not investment or legal advice. Not a solicitation for Muljat Group Commercial or Landmark Real Estate Management.