Real Estate Due Diligence Flashcards
7 cards from real Real Estate Investing practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Due Diligence flashcards as text
What is the primary purpose of due diligence in real estate investing?
Answer: To verify all material facts and assess risks before closing
Due diligence allows investors to verify all material facts, uncover hidden risks, and make an informed purchase decision before committing to a closing.
Which document provides a chronological history of all ownership transfers for a property?
Answer: Chain of title
The chain of title documents every transfer of ownership in sequence, allowing investors to identify gaps, defects, or competing claims on the property.
What does a Phase I Environmental Site Assessment (ESA) primarily evaluate?
Answer: Potential environmental contamination on or near the property
A Phase I ESA identifies recognized environmental conditions through records review, site inspection, and interviews to reveal contamination liabilities.
An investor discovers an unpermitted addition during due diligence. What is the primary concern?
Answer: The buyer may be liable for costly code compliance retrofits after closing
Unpermitted additions can require expensive retrofitting to meet current building codes, creating a financial liability that transfers to the new owner at closing.
Which of the following is NOT typically part of the physical due diligence process?
Answer: Title search
A title search is part of legal due diligence; physical due diligence focuses on the property's structural and mechanical condition.
What is an estoppel certificate in the context of real estate due diligence?
Answer: A document signed by tenants confirming their lease terms and current status
An estoppel certificate is signed by existing tenants to confirm lease terms, current rent, any outstanding disputes, and concessions, binding them to those statements.
What does ALTA stand for in the context of real estate title insurance?
Answer: American Land Title Association
The American Land Title Association (ALTA) sets industry standards for title insurance policies and surveys used in real estate transactions across the United States.
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