Due Diligence Checklist: Best Practices for Buying Property

Imagine buying your dream home, only to find hidden issues like zoning problems or structural damage once the sale goes through.

It happens more often than you’d think. One survey found that 26% of Australian buyers encountered problems after settlement that proper due diligence could have picked up.

That’s why doing your due diligence is so important. It helps you avoid costly surprises and makes sure everything checks out legally, financially, and physically.

Let’s take a look at what due diligence involves and how to do it right.

What is property due diligence?

Put simply, due diligence means carefully checking a property’s legal, financial, and physical condition before buying.

It includes the following:

• Reviewing legal documents
• Inspecting the home’s condition
• Checking planning regulations
• Ensuring the investment aligns with your financial and lifestyle goals

It’s your chance to make sure there are no hidden issues before you commit to buying a property.

Now, let’s go over each part of the process so you know what to look for.

Property buying due diligence

Before you sign on the dotted line, it’s worth making sure you understand everything you’re signing up for. A due diligence checklist can help you cover all bases, lower your risk, avoid potential issues, and make confident decisions.

Here are five types of due diligence you’ll need to consider before you buy.

1. Financial due diligence

One of the first steps you’ll want to take is getting your finances in order. If you’re taking out a mortgage, this includes securing pre-approval. It’s also a good idea to write down all the costs you’ll need to cover on top of the price of the property.

Here are some common costs to check before buying a property:

• Stamp duty
• Conveyancing or legal fees
• Council rates
• Strata or body corporate levies (if applicable)
• Recent property sales in the area
• Mortgage application or establishment fees
• Loan service or account-keeping fees
• Lenders Mortgage Insurance (LMI), if borrowing over 80%

If you intend to purchase an investment property, you will also need to add property management costs and potential rental rates into the mix.

As part of your financial due diligence, it is also a good idea to research market trends and recent property transactions for similar homes in the area. This type of market analysis will help you spot a fair deal and reduce your risk of overpaying.

2. Legal due diligence

Your solicitor or conveyancer will go over the contract and check the property’s title to make sure there are no hidden issues. Things like easements or restrictions could affect what you can do with the property, so it’s important to know about them upfront.

Here are some key legal checks to make before buying a property:

• Have the contract of sale reviewed by a solicitor or conveyancer
• Request a title search to confirm legal ownership
• Check any easements (e.g., shared driveways, drainage access)
• Check for covenants or restrictions on how the land can be used
• Look for any caveats on the property
• Confirm zoning rules and planning overlays
• Make sure any existing structures are council-approved

If you are looking at buying a property with room to build, checking planning schemes and zoning regulations will ensure that your plans are legal and achievable.

3. Property inspection and condition

It is essential to arrange a licensedbuilding and pest inspection. These uncover things that might not be obvious at first glance, such as structural issues and potential pest infestations. Discovering them might not necessarily be a dealbreaker, but they might give you more room for price negotiation.

What to check when reviewing a property's condition:

• Check the building report for cracks, movement, or roof issues
• Check the pest report for termites or past infestations
• Look for water damage, damp, or mould
• Confirm renovations have council-approved permits
• Request compliance certificates for completed work
• Confirm connection to mains water and sewer (or review septic)
• Confirm sheds, decks, and fences are council-approved

If you're buying into a strata scheme, it’s also worth requesting a strata report. This will reveal current levies, upcoming works, and any disputes within the body corporate that you should know about including any ongoing legal issues that the scheme may be involved in.

4. Location and environment

Local council projects, nearby schools, transport, and parks can all affect how liveable a property is, and how much you might pay for it. It’s important to think about how these could impact your day-to-day life.

Things to check about the location and environment:

• Check proximity to shops, schools, parks, and public transport
• Look into local council development plans
• Review public transport access and frequency
• Consider access to major roads and commute times
• Research flood risk for the area
• Check bushfire risk zone maps
• Get a professional's opinion on soil stability or erosion risk
• Check mobile reception and internet availability

This is important in situations such as if the suburb does not have a regular or reliable public transport system, as this can affect the value of your home. Additionally, it will impact your ability to get around if you don’t have access to a car.

It is also worth investigating the potential and history of environmental risks such as floods, bushfires, and soil instability in the area.

5. Other due diligence considerations

Alongside the main checks, there are a few extra things worth ticking off before you buy.

Final checks to make before committing to a property:

• Get a property insurance quote (to flag any issues for the property)
• Think about whether the home suits your long-term needs
• Consider future lifestyle changes (family, accessibility, etc)
• Review your budget one last time (including all ongoing costs)
• Confirm you’re happy with the neighbourhood and community feel
• Retain quotes from any trades, on any potential renovations that may need to be completed once purchased, as this may change your perspective
• Inspect property at different times of day and night.
• If possible confirm your neighbours and pets/animals that are kept within a strata scheme.

Lastly, before buying, ensure you’ve got the right people around you. That includes a good real estate agent, a solicitor or conveyancer, and anyone else you trust to give you solid advice. Having the right team can make the whole process much more manageable.

Summing up

Doing your due diligence helps you make sure the property is the right fit for you and that no hidden issues are waiting to pop up later.

It’s worth taking the time to ask questions, do your research, and get advice from people who know what they’re doing. It could save you a lot of stress (and money) down the line.

Need help with the purchasing process? The team at DiJones can provide you with savvy local insights and committed support at every stage of your house hunt.

Contact ustoday to see how we can help you, or download our guide on how to buy property.

FAQs

What is the purpose of a property due diligence checklist?

A property due diligence checklist helps buyers evaluate legal, financial, and physical factors to avoid costly mistakes during the real estate transaction.

It supports informed decisions by helping you identify any potential risks or issues that may significantly impact the property's value, use, or future sale.

Who should I hire to help with due diligence?

Property lawyers, conveyancers, buyers agents, building and pest inspection specialists, and real estate agents can all provide professional advice to answer questions during the due diligence process.

These experts help interpret legal documents, conduct title searches, and carry out physical inspection checks that uncover issues that may affect the property.

Does due diligence apply to investment or commercial properties?

Yes! The same principles apply, but you’ll also want to review any commercial lease, consult a commercial property due diligence checklist, and assess things like land tax, existing tenancies, and planning schemes.

Understanding these extra obligations is key to avoiding issues that could affect the property or impose restrictions or obligations on future use.

What if issues are found during due diligence?

The due diligence checks might uncover concerns that make you reconsider your purchase. These might include zoning issues, high fire risk, unresolved repairs, or restrictions related to native vegetation or planning permits.

Depending on the situation, you might renegotiate, walk away, or include conditions in your contract to mitigate risks.

Can I do due diligence myself?

While some research can be done independently, like reviewing suburb profiles or market data, it’s best to get professional advice.

Experts can spot a range of issues in property transactions that you might miss, especially when buying rural properties, strata homes with owners corporations, or residential property in fast-moving property markets.