The Distressed Property Due Diligence Checklist: 25 Things to Verify Before You Bid

Title & Ownership

• ☐ Full title search — all recorded liens, encumbrances, and easements in the chain of title
• ☐ Ownership verification — confirm the person/entity selling actually holds clear title or has legal authority to sell
• ☐ Outstanding mortgages — identify all mortgage liens and balances; confirm the foreclosing party is the first-lien holder
• ☐ IRS federal tax lien search — by owner name, current and prior owners if applicable
• ☐ State tax lien search — Florida DOR and FLHSMV
• ☐ Lis pendens for other litigation — beyond the foreclosure case you know about

Tax & Assessments

• ☐ Property tax status — all years current or delinquent balance calculated including penalties
• ☐ Tax certificates outstanding — pull from county tax collector; calculate redemption cost
• ☐ Special assessment districts — community development districts (CDDs), drainage districts, lighting districts
• ☐ Water/sewer lien status — contact the utility authority; certified delinquencies run with the property

HOA / Condo

• ☐ HOA regular assessment balance — total owed including late fees and legal fees
• ☐ HOA super-priority amount — 12 months of regular assessments (survives first-lien foreclosure)
• ☐ Pending or assessed special assessments — any capital expenditure assessments levied or proposed
• ☐ Condo building litigation status — active lawsuits affecting the building affect buyer pool
• ☐ Building reserve study and reserve adequacy — post-SB 4-D, inadequate reserves require near-term special assessments
• ☐ Insurance status of the building — is the master policy in force? At what coverage level?

Municipal & Code Compliance

• ☐ City municipal lien search — code violations, unsafe structure notices, overgrown lot fines
• ☐ County code enforcement lien search — separate from city-level violations
• ☐ Open building permits or failed inspections — pull from the building department by address
• ☐ Zoning confirmation — confirm the property's current use complies with zoning; check for any variances or notices

Physical Condition

• ☐ Exterior condition assessment — roof condition, foundation, structure, visible damage
• ☐ Interior inspection (where access is available) — HVAC, plumbing, electrical, mold, termites
• ☐ Flood zone determination — FEMA flood map zone; confirm flood insurance cost and availability
• ☐ Insurance availability confirmation — can this property be insured at a reasonable cost in this ZIP?
• ☐ Occupancy status — is the property vacant or occupied? If occupied, what is the legal status of the occupant?

Market & Exit

• ☐ ARV established with 3+ closed comps — fully renovated, same property type, within 0.5 miles, last 90 days
• ☐ Absorption rate — how fast are comparable renovated properties selling? Estimate your marketing time
• ☐ Rental demand validation (if rental exit) — confirm achievable rents from recent leases in the area
• ☐ Rehab estimate with contractor input — at least a rough estimate from a contractor familiar with comparable properties
• ☐ Maximum allowable offer calculation — (ARV × 0.70) − Rehab − Surviving Liens − All costs

How to Use This Checklist

For courthouse auction purchases, complete items 1–20 before bidding (items 21–25 should be completed in the weeks leading up to the auction as part of market research). For REO and short sales, complete all 25 during the inspection and due diligence period.

Mark any item as "RED" (deal-killer), "YELLOW" (quantify the risk and adjust bid), or "GREEN" (clear). Proceed only when all RED items are resolved and all YELLOW items are quantified.

Marcus's Title & Lien Search Report covers items 1–20 comprehensively for any South Florida property. The BPO & Valuation Report covers items 21–25.