Fix and Flip Due Diligence Checklist: What to Check Before You Buy

When should you do due diligence on a flip?

Due diligence isn't paperwork for its own sake. It's the last cheap moment to find a problem. After closing, every surprise comes out of your profit.

Do it during the window your purchase contract gives you. Know the exact deadline and what you have to do (and by when) to cancel or renegotiate. If your contract has no inspection contingency, or a very short one, much of this work has to happen before you sign. Your real estate attorney or agent can explain how your contract handles it. This checklist is educational, not legal advice.

The due diligence checklist

Tick each item once you have verified it. If a check turns up a problem, decide whether to fix it (renegotiate or budget for it) or walk away, and write the decision down with the numbers.

1. The numbers

2. Physical condition

3. Title and liens

4. Permits and code history

5. Location and use

6. Financing and exit

What are the biggest red flags on a flip?

• Foundation or structural movement without a structural engineer's assessment
• Unpermitted square footage that your ARV depends on
• Title clouds that can't be cleared before closing
• Flood zone surprises that change insurance costs and buyer demand
• Occupants with unclear move-out arrangements
• An ARV that only works with the single best comp

Any one of these can be workable with the right price and plan. Two or more usually means walking away.

How does your lender's review fit in?

A lender looks at many of the same things, especially the property, the budget, the ARV, and the exit. Axelrad's hard money page describes underwriting the property, the business plan and the way you get out of the loan. But the lender's review protects the lender's position, not yours. Do your own diligence.

Example (hypothetical numbers): an inspection finds the sewer line needs replacement at an estimated $9,000. Your options: ask the seller for a $9,000 price reduction, ask for a credit, add the cost to your budget and accept a smaller profit, or cancel within your contract period. Write the decision down with the numbers.

How do you turn findings into a renegotiation?

Bring numbers, not adjectives. "The roof is bad" invites a debate. "The roofer's written bid to replace the roof is $11,400, attached" invites a decision. Summarize every material finding in one short list with the cost to fix and the source of that cost, and send it to the seller or their agent before your deadline. Ask for a specific remedy for each item: a price reduction, a credit at closing, or a repair before closing (repairs by a seller on a property you're about to renovate are usually less useful than a price change).

If the seller won't move and the deal no longer works at the new numbers, cancel within your contract window. Walking away from a bad deal is a good outcome.

Should you re-run your numbers after due diligence?

Always. Update your rehab budget with every finding, update your holding period if new work adds time, and re-check that your loan request still fits your lender's LTC and ARV limits. Then compare your profit to the minimum you set before you made the offer. If it's below that minimum, you have your answer.

Who should be on your due diligence team?

• A home inspector, plus specialists where needed (structural, sewer, roof, environmental)
• Your general contractor for a scope-and-budget walkthrough
• A title company or real estate attorney
• An insurance agent
• A local agent for comps and resale insight
• Your lender, for criteria and timing

Key takeaways

• Do due diligence inside your contract window, while you can still renegotiate or cancel.
• Check numbers, condition, title, permits, location, and financing.
• Tick off each item, and decide fix or walk away with numbers.
• Your lender's review doesn't replace your own.

Clear the checklist, then close

When every item is ticked off, look at the criteria on the fix-and-flip loan page and submit your deal.