Construction Due Diligence Checklist: What a Due Diligence Consultant Reviews Before You Buy or Build

Construction due diligence is the process of uncovering the physical, regulatory and financial risks of a site or building before you commit to buying, renovating or building on it. Done well, it gives you a clear list of what the project will really cost and what could go wrong. Done poorly, or skipped, it can leave you owning problems that wipe out your returns.

Here's what a thorough construction due diligence review covers, and how a consultant helps.

Why Construction Due Diligence Matters

Most due diligence periods are short, often 30 to 90 days. In that time, you need to answer one question: can this project be built for the budget and on the schedule your pro forma assumes? Brokers and lenders review title, leases and financials. Construction due diligence fills the gap by reviewing the physical and regulatory side. We explain why an owner's representative is critical during due diligence in a separate post.

The Construction Due Diligence Checklist

Site conditions

• Phase I Environmental Site Assessment, and Phase II if flagged
• Geotechnical report on soils, groundwater and seismic conditions
• Survey showing boundaries, easements, encroachments and topography
• Flood zone, wetlands and protected habitat review
• Utility availability and capacity

Existing building conditions (for acquisitions or renovations)

• Property condition assessment covering structure, roof, envelope and MEP systems
• Hazardous materials survey, such as asbestos and lead paint
• Accessibility review against current code
• Seismic evaluation, especially important in the Pacific Northwest
• Remaining useful life and capital replacement estimates

Zoning and entitlements

• Zoning verification and allowable use, density and height
• Required land use approvals and expected timelines
• Outstanding code violations or open permits
• Off-site improvement requirements and system development charges

Cost and schedule

• Preliminary construction cost estimate or validation of the seller's estimate
• Market check on labor and material pricing
• Realistic design, permitting and construction schedule
• Contingency recommendations based on identified risks

Contracts and documents

• Review of existing design contracts, drawings and permits that may transfer
• Warranties and guarantees on existing systems
• Service contracts and operating cost history

For a deeper look at each type, read what kinds of due diligence a commercial construction management firm performs.

Turning Findings Into Decisions

A due diligence report is only useful if it leads to action. A good consultant ranks findings by cost and risk and suggests how to handle each. Options typically include:

1. Renegotiate the price to account for repairs or added costs
2. Request seller repairs or credits before closing
3. Adjust the project scope or design to avoid problem areas
4. Increase contingency in the budget
5. Walk away if the risks outweigh the opportunity

Choosing a Construction Due Diligence Consultant

Look for a consultant with real construction and development experience, not just inspection experience. They should be able to estimate costs, understand permitting and explain how findings affect your schedule. Local knowledge matters too. Codes, fees and permitting timelines in Portland differ from those in Eugene or Seattle.

Independence also matters. A consultant who might later bid on your construction contract has a conflict of interest. An owner's representative works only for you.

Due Diligence for Lenders

Lenders also need independent construction reviews before funding a loan. BC Group provides lender and financial services, including plan and cost reviews and construction monitoring.