Due Diligence

What it is

Due diligence is the window between going under contract and closing where I verify every assumption I made to write the offer. The contract gives me a specific number of days to inspect the property, investigate title, and get out clean if something shows up. Miss those deadlines and the earnest money stops being refundable.

This is not a formality. A lot of new flippers treat it like one and get burned.

Why it matters

I watch two failure patterns repeat constantly. The first is the flipper who already decided they want the house, so they do a quick walk, skip the sewer scope, wave off the title search, and close. Three weeks in, the sewer backs up or an old lien surfaces. Now it’s their problem.

The second is the flipper who does a thorough inspection but misses the deadlines. They scheduled it for day 12, got the report on day 15, tried to negotiate on day 16. Contract said day 14. Earnest money is no longer refundable. Seller knows it and refuses to move. Flipper either closes on a bad deal or walks and eats the deposit.

There’s also the version I talk about in the seven nightmares video — I bought a house that came with an extra lot, figured I’d sell it to a builder. Turned out there was a utilities easement all the way down the center of it. Can’t build on an easement. The lot was basically worthless. Title work would have caught it. The lesson: don’t rely on anyone else for due diligence. You’re the last line of defense.

How it shows up

The physical pass covers the quick six — hvac, plumbing, electrical, structural, roofing, siding. Every time, no exceptions. Sewer scope too, because a collapsed sewer line that wasn’t scoped is your problem as soon as you close. Typical sewer scope is a few hundred bucks. The repair if you skip it is $10K-$40K. I’ve paid both. I now scope every one.

Title work runs alongside this. You need clear title — no liens, no old mortgages that never got released, no easements you didn’t plan for. A utility easement down the center of a lot you planned to build on is a great way to find out a vacant lot is basically worthless. That one came from the seven nightmares video too. The title company catches most of these if you actually let them do their job.

Build a DD calendar the day the contract is signed. Day 1, order the title search. Day 2, schedule the inspection and sewer scope. Every item gets a target date inside the contract window with buffer at the end. Not “I’ll get to it.” A calendar.

Related

inspections, title company, earnest money, closing costs, sewer line, quick six