The buyer due diligence checklist, from the buy side.

Freddie requires a rent roll dated within 30 days of submission with 18 specified fields per unit, including original occupancy date per tenant, concessions, arrearages, subsidies, security deposit held, month-to-month status, and — critically for LA — whether each unit is rent controlled or rent stabilized. How it blows up: a rent roll built in a spreadsheet rather than property-management software almost always omits original occupancy date. In a stabilized building that field is not cosmetic — it is the only way to reconstruct the lawful rent history. Miss it and the whole rent roll becomes unverifiable.

The lender wants best efforts at three years, plus trailing three-month physical and economic vacancy and an aged receivables report at 30, 60 and 90 days. How it blows up: two ways. First, cash-basis statements, or statements that net expenses against revenue, force the lender to rebuild your P&L — and they rebuild conservatively. Second, and worse, the trailing-three rule: if your last three months of net rental income are more than 2% below the trailing six or twelve, the lender must adjust downward. Do not go to market on a soft quarter.

A lease audit before commitment is mandatory, on a published sample: for a 10 to 100 unit building, the greater of five leases or 10% of them, reconciled against the rent roll. Material discrepancies require the lender to expand the sample. How it blows up: missing leases and undocumented side deals. In older LA buildings, long-tenured tenants routinely have no current written lease — the 1987 original is gone and it has been oral month-to-month since. That triggers an expanded audit and a formal disclosure of what could not be reviewed. Find these before we do and write down what you know.

Here is something you will not read on most seller sites: neither Fannie nor Freddie requires residential tenant estoppels. Both require them only for commercial leases — Fannie for any commercial lease at 5% or more of effective gross income, Freddie for commercial leases at 5% or more of gross potential rent, confirming eleven enumerated items. So if your building is all residential, a demand for signed estoppels from every tenant is a buyer preference, not a lender requirement, and it is negotiable. If you have ground-floor retail, it is not negotiable and you should start early. How it blows up: in a rent-stabilized building, an estoppel is where your records and the tenant's recollection meet in writing. When they disagree about what the rent is or what was promised, you have just created a document memorializing the dispute.

Laundry leases, bulk cable and internet agreements, landscaping, and rooftop telecom or solar. How it blows up: the rooftop lease is the sharpest one. If it involves solar or any power generation, Fannie treats it as a Material Commercial Lease by definition, which pulls it into full lease-approval review — and Fannie must not approve any Material Commercial Lease that includes PACE financing. A twelve-year laundry lease at below-market terms is a smaller problem but it still survives closing and it still reduces what the building is worth.

Required, and used for something other than what you think. How it blows up: your bill is evidence of what taxes were. In California the lender underwrites what they will be — the millage rate applied to the greater of the loan amount or assessed value. On a building held since before the last reassessment, the buyer's tax line is a multiple of yours. Nothing you can do about it, but knowing it exists stops you from reading a fair offer as a lowball.

Worth flagging honestly: we could not find a Fannie or Freddie provision requiring loss runs from a seller. This is market convention, driven by the buyer's insurance broker needing to quote the risk. How it blows up: claim frequency in old plumbing stock drives the quoted premium well above what you currently pay. And because the lender sets expense lines using all available information, it is the buyer's quoted premium that goes into the model, not your historical one. Water claims in a 1950s building are the most expensive line item nobody negotiates.

Utility bills are a required expense input. Separately, RUBS, cable, laundry, parking and other tenant income must be validated against the appraisal or third-party data. How it blows up: RUBS income you book but cannot document, or that is not properly provided for in the leases, gets struck from effective gross income entirely. On a 30-unit building that can be tens of thousands of dollars of NOI that simply disappears from the underwriting.

This is the LA-specific one, and it is the most common deal-killer we see. Under LAMC § 151.05 an owner cannot legally demand or accept rent without current registration, and registration is complete only when fees are paid and the Rent Registry is submitted. Tenants may raise non-payment of RSO or SCEP fees as an affirmative defense against eviction. How it blows up: a registration lapse means the income stream being purchased was, for that period, not lawfully collectible — and every tenant in the building holds a defense. On the code side, an open SCEP order becomes, in the lender's hands, a code violation that must be categorized as a critical repair and completed within six months.

Every one you have. Where certificates are missing, the buyer's zoning report must either affirmatively state the absence is not a violation or explain why it cannot say that. How it blows up: permit history that shows a square footage or unit count inconsistent with the rent roll. That single inconsistency converts a rent-roll line into an illegal-unit finding, which forces the appraiser into a legality opinion, which triggers required Ordinance and Law insurance plus a non-conforming recourse carveout. One line item, four consequences.

A consultant walks the building and produces a deficiency list plus an estimated useful life for every major component. That table becomes the repair escrow and the annual replacement reserve. This is the report that most directly moves your price.

Still the current standard; EPA names E1527-21 as the compliant practice for All Appropriate Inquiries at 40 CFR 312.11. On an apartment building the usual findings are historical dry cleaners nearby, old underground tanks, and adjacent industrial use. A Phase I recommending a Phase II adds weeks.

A Level 1 assessment is required for buildings with a weak or soft story at any level, buildings within 50 feet of a mapped fault trace or inside an Alquist-Priolo zone, and any reinforced concrete building built before 2000. Pre-1978 wood frame with tuck-under parking trips it automatically. The output is SEL-475 — what lenders now call what everyone used to call PML.

The appraiser must render an opinion on whether the property is legal, legally non-conforming, illegal, or other, and expressly cannot decline by saying they are not an expert. Where a property is legally non-conforming, the appraiser must analyze whether it can be rebuilt to its current configuration and, if not, run that through all three valuation approaches. The ALTA/NSPS standards were updated effective 23 February 2026.

With an agency lender, typically 45 to 60 days from contract, driven by the third-party reports and the lender's conditions rather than by the buyer. A cash principal buyer with no lender and no appraisal condition can compress that substantially — we routinely close in 20 to 30 days when the seller has documents ready.

No. A buyer is entitled to property-level financials — rent roll, operating statements, leases, tax bills, utility bills. Your personal or entity tax returns are not a normal diligence item on a sale, as distinct from a refinance where the lender is underwriting you.

Not by Fannie or Freddie for residential units — both require estoppels only for commercial leases above the thresholds in their guides. If your building is all residential, a demand for tenant estoppels is a buyer preference and is negotiable. If you have ground-floor retail, plan on it.

Extremely common in older LA buildings and not fatal. Say so up front and provide whatever you do have — rent ledgers, original occupancy dates, correspondence. What hurts is a buyer discovering the gap during the lease audit rather than hearing it from you, because the lender then expands the sample and formally documents what could not be reviewed.

Generally yes, and most sellers do restrict tenant contact until late in the process. Interior unit access for the PCA and appraisal is a different matter — the lender needs a sample, and California requires proper notice to tenants for entry. Negotiate the access protocol in the contract rather than fighting about it during escrow.

In our experience on LA buildings: something in the City record contradicting something in the seller's file. An open order nobody mentioned, a unit that does not appear on any permit, a registration lapse. Not because any of those is fatal on its own — because discovering one makes a buyer re-examine everything else.