Real Estate Investing Real Estate Due Diligence 1

Question 1

What is the primary purpose of due diligence in real estate investing?

Accepted Answer

To verify all material facts and assess risks before closing

Answer

To negotiate a lower purchase price

Answer

To secure financing from a lender

Answer

To market the property to future tenants

Question 2

Which document provides a chronological history of all ownership transfers for a property?

Accepted Answer

Chain of title

Answer

Title commitment

Answer

Property survey

Answer

Deed of trust

Question 3

What does a Phase I Environmental Site Assessment (ESA) primarily evaluate?

Accepted Answer

Potential environmental contamination on or near the property

Answer

Structural integrity of the building

Answer

Zoning compliance and land use restrictions

Answer

Accuracy of the property's financial statements

Question 4

An investor discovers an unpermitted addition during due diligence. What is the primary concern?

Accepted Answer

The buyer may be liable for costly code compliance retrofits after closing

Answer

The addition increases the property's assessed value automatically

Answer

The lender will increase the loan amount to cover the addition

Answer

The property's insurance premium will decrease due to the added square footage

Question 5

Which of the following is NOT typically part of the physical due diligence process?

Accepted Answer

Title search

Answer

Roof inspection

Answer

HVAC system evaluation

Answer

Foundation assessment

Question 6

What is an estoppel certificate in the context of real estate due diligence?

Accepted Answer

A document signed by tenants confirming their lease terms and current status

Answer

A legal process to remove squatters from a property

Answer

A zoning variance that allows a non-conforming use to continue

Answer

A type of insurance policy protecting against title defects

Question 7

What does ALTA stand for in the context of real estate title insurance?

Accepted Answer

American Land Title Association

Answer

Alternative Lender Title Approval

Answer

Assessed Land Transfer Agreement

Answer

Automated Lien Transfer Analysis