CRE Buyer Due Diligence Checklist

Due diligence is the structured process commercial buyers use to verify everything they were told about a property before committing real money at closing. In Rochester and across the surrounding region, a strong due diligence period typically runs 45 to 60 days, and using it well separates clean acquisitions from painful surprises discovered after the deal closes.

The financial review comes first because numbers drive everything else. Request trailing 36 months of operating statements, current rent roll, copies of every lease and amendment, lease estoppels from each tenant confirming current terms, utility bills for the last 12 months, property tax bills for the last three years, insurance loss runs, and any capital expenditure history. Reconstruct NOI independently from those documents rather than trusting the broker’s pro forma. The gap between marketing NOI and verified NOI runs 10 to 25 percent on typical Rochester area listings, almost always in the seller’s favor.

Physical inspection covers the building itself. Hire a commercial building inspector or a contractor with commercial experience to walk the property systematically. Roof age and condition. HVAC systems with serial numbers checked against age. Plumbing and electrical capacity. Foundation and structural elements. Parking lot condition. Site drainage. ADA compliance, particularly on older buildings. Michigan’s freeze thaw cycles wear on parking lots and roofs faster than buildings in milder climates, so age alone understates condition issues.

Environmental due diligence is mandatory on industrial property and recommended on most older commercial. A Phase I environmental site assessment costs $2,500 to $4,500 and takes 2 to 3 weeks. The assessment researches historical uses, regulatory records, and visible site conditions. Phase I reports flag concerns rather than confirm contamination. If Phase I identifies recognized environmental conditions, Phase II sampling may be needed at significantly higher cost. The legacy automotive manufacturing history across this region means Phase I findings appear more often than in markets without that industrial heritage. Lenders require Phase I on nearly all industrial loans and many commercial loans.

Title and survey work runs in parallel. The title commitment lists exceptions including easements, restrictive covenants, encroachments, and unrecorded leases the buyer will take subject to. Some exceptions are routine. Others limit what the buyer can do with the property. Survey work confirms boundaries, improvements, easements, and any encroachments. ALTA surveys cost $3,000 to $6,000 depending on size and complexity.

Zoning verification confirms intended use is allowed. A buyer planning light manufacturing in a commercial zoned building needs to know whether use is permitted, requires conditional use approval, or requires rezoning. Each path has different costs and timelines. Rochester, Rochester Hills, and surrounding municipalities each have different codes, so checking the specific jurisdiction matters.

Lease estoppels from tenants confirm what the seller represented about leases. Each tenant signs a document confirming current rent, lease term, security deposit, no defaults, and any side agreements. Estoppels protect the buyer from discovering after closing that a tenant had a verbal modification, a deferred rent agreement, or some other arrangement not in the lease file.

Michigan’s attorney close process means both sides have legal counsel involved throughout due diligence. That adds cost but catches problems earlier than states without that structure. Buyers should expect attorney review on every significant document during the diligence period rather than only at closing.

TDG Commercial, known as best commercial real estate agents in Rochester, manages due diligence checklists for buyers across the region, coordinating consultants and tracking deliverables so the contingency period produces clear information rather than rushed work near the deadline.