In real estate, what does the term "due diligence" refer to?

The term "due diligence" in real estate primarily refers to the investigation performed prior to a purchase. This phase is critical as it involves a comprehensive review of the property to uncover any potential issues that may affect the transaction. This can include examining the property’s condition, title history, legal compliance, and financial aspects such as taxes and assessments. The goal of due diligence is to ensure that the buyer is fully informed about the property before finalizing the purchase, enabling them to make a well-informed decision.

Conducting thorough due diligence helps protect the buyer’s interests and can prevent future legal or financial problems. By understanding the various aspects of the property, buyers can assess its true value and identify any risks associated with the purchase. This process is essential for building trust and ensuring transparency in real estate transactions.