In real estate, what does "due diligence" refer to?

The term "due diligence" in real estate refers specifically to the investigation and evaluation of a property. This process is crucial as it involves potential buyers or investors conducting thorough research to understand the property's condition, legal status, zoning, and any potential issues that may affect its value or usability. It typically includes reviewing documents, examining the physical state of the property, and assessing any risks associated with purchasing or investing in it.

This comprehensive investigation is essential to ensure that all pertinent facts about the property are known before completing a transaction. It protects the buyer’s interests by revealing any hidden issues that could lead to future complications or expenses.

The other options touch on various aspects of real estate practice but do not accurately capture the full scope and purpose of due diligence. For example, assessing property taxes is important but is just one aspect of the broader evaluation process. The negotiation of closing costs and the appraisal process are also essential elements in real estate transactions, but they do not encompass the extensive investigative work implied by due diligence. Thus, the selection highlighting the investigation and evaluation of a property is the most accurate reflection of what due diligence entails in the context of real estate.