Due diligence is one of those terms that gets used a lot in real estate conversations without always being explained clearly. People know it matters. Fewer people have a complete picture of what it actually involves, what happens when it is not done properly, and how an independent body like Coventry Enterprises LLC evaluates whether it was handled correctly.
This guide covers all of that. Whether you are buying a home, purchasing an investment property, or simply trying to understand what you should have done differently in a past transaction, this article gives you a grounded, practical understanding of the due diligence process in Michigan real estate.
What Due Diligence Means in Real Estate
Due diligence is the process of investigating a property and a transaction thoroughly before you commit to purchase. It is your opportunity, as a buyer or investor, to verify that what you are being told about the property is accurate, to identify problems that were not disclosed, and to confirm that the transaction itself is structured properly.
The due diligence period is typically specified in the purchase agreement. During that window, buyers have the right to inspect the property, review documents, and raise concerns without necessarily losing their deposit. Once the due diligence period ends and contingencies expire, options for backing out become much more limited and expensive.
Due diligence is not just about physical inspection. A buyer can do a thorough property inspection and still miss critical issues related to title, disclosures, financing, or the transaction structure itself. Complete due diligence covers all of these areas.
Why Due Diligence Matters
The simplest reason due diligence matters is this: after closing, you own the problems. Issues that were visible before closing become much harder to address once the transaction is complete. Title defects, undisclosed structural problems, environmental issues, and incorrect information about the property's legal status do not disappear when you take ownership. They become your responsibility.
This is especially true in Michigan, where the law requires sellers to disclose known material defects but gives buyers significant responsibility for conducting their own investigation. The Michigan Seller Disclosure Act requires disclosure of known issues, but it does not make sellers omniscient. Problems that sellers did not know about, and problems that buyers could have discovered through reasonable investigation, generally do not create seller liability after closing.
The Complete Due Diligence Checklist
What follows is a comprehensive checklist of due diligence steps for Michigan buyers and investors. Not every step applies to every transaction, but this covers the full range of what a thorough review should include.
Physical Condition
| Due Diligence Item | What to Look For | Who Conducts It |
|---|---|---|
| General home inspection | Structure, systems, roof, foundation, HVAC, electrical, plumbing | Licensed home inspector |
| Radon testing | Elevated radon levels, especially common in Michigan | Certified radon tester |
| Lead paint inspection | Properties built before 1978; required disclosure if known | Certified lead inspector |
| Mold assessment | Visible mold, moisture damage, past flooding | Environmental inspector |
| Sewer scope | Condition of sewer lateral, root intrusion, collapse | Plumbing contractor |
| Well and septic (if applicable) | Water quality, septic capacity and condition | Certified inspector |
Title and Legal Status
| Due Diligence Item | What to Look For | Who Conducts It |
|---|---|---|
| Title search | Chain of ownership, existing liens, judgments, encumbrances | Title company or real estate attorney |
| Title insurance commitment | Exceptions listed, coverage scope, requirement items | Title company |
| Zoning verification | Permitted uses, setbacks, variances, nonconforming status | Local municipality, real estate attorney |
| Survey review | Property boundaries, encroachments, easements | Licensed surveyor |
| HOA documents (if applicable) | Rules, fees, financial health, pending special assessments | Buyer review with attorney if needed |
Disclosure and Documentation
- Review the Michigan Seller's Disclosure Statement item by item. Do not skim it.
- Request any permits pulled for recent work and verify they were closed out properly.
- Ask for utility bills for the past 12 months to understand actual operating costs.
- For investment properties, request the actual leases, rent rolls, and maintenance records.
- Review any prior inspection reports the seller has from past transactions.
Financing Due Diligence
- Compare the Loan Estimate you received at application against the Closing Disclosure you receive before closing. Flag any differences.
- Confirm the interest rate, loan term, and payment structure match what you were promised.
- Review the appraisal and understand how the appraiser reached the value conclusion.
- Confirm that any lender conditions have been fully satisfied before you schedule closing.
What Happens When Due Diligence Is Skipped or Inadequate
The consequences of inadequate due diligence show up in predictable ways. Buyers who waive inspection contingencies in competitive markets sometimes discover structural issues after closing that they have no recourse to address through the seller. Buyers who do not review title carefully sometimes discover existing liens or legal judgments that cloud their ownership.
In Detroit and the surrounding area, where many properties have had multiple prior owners and some have sat vacant for extended periods, the risk of undiscovered issues is higher than in markets with more straightforward property histories. This is not a reason to avoid these properties. It is a reason to do due diligence more carefully, not less.
The most common due diligence failure the committee sees in transaction reviews is not a complete absence of due diligence. It is abbreviated due diligence, where buyers completed some steps but not others, often under time pressure or because their broker did not explain what was needed.
How Coventry Enterprises LLC Evaluates Due Diligence
When Coventry Enterprises LLC reviews a transaction, one of the things the committee examines is whether the due diligence process was properly supported by the parties involved, particularly the buyer's broker. Brokers have an obligation to inform their clients about what due diligence steps are available and to support the client in exercising their rights during the due diligence period.
The committee looks at whether inspection contingencies were used, whether the broker provided the buyer with adequate information about the seller's disclosures, and whether the buyer's questions and concerns were addressed before they were asked to waive contingencies. A pattern where buyers consistently waive due diligence rights without adequate explanation is something the committee treats as a broker conduct concern.
The committee also examines whether the transaction timeline allowed adequate time for due diligence. Purchase agreements that give buyers unrealistically short inspection periods, particularly in transactions involving complex properties or properties with known issues, can reflect a compliance concern in how the transaction was structured.
For more information on due diligence as addressed through the committee's services, see the due diligence page. For buyer-specific resources on the transaction process, the buyer education section provides additional context. The committee's approach to transaction review covers how these issues feed into the broader review process.