Real Estate Brokerage Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent on a brokerage, they have usually reviewed summary financials, met the owner and heard about the agents. Real estate brokerage due diligence is where those impressions are tested against records: commission reports, agent agreements, licensing files, trust account reconciliations and the pipeline of pending deals. A disciplined review helps buyers confirm what they are paying for and gives lenders the information they need.
This checklist is general information for buyers of existing, operating residential and commercial brokerages. It is not legal, tax or regulatory advice. Licensing, trust account, affiliated business and independent contractor rules vary by state, and buyers should rely on qualified attorneys and accountants for those reviews.
Financial Records
- Several years of tax returns and financial statements that reconcile with each other
- Gross commission income, agent payouts and company dollar by month and by agent
- Property management fees and any other recurring revenue
- Documentation for owner compensation, personal expenses and proposed add-backs
- A complete schedule of existing debt and other obligations
Our article on brokerage company dollar explains how to read commission and split data.
Agents and Staff
- A roster with license status, tenure, plan type and production history
- Independent contractor agreements, split plans, caps, fees and any special arrangements
- Recent agent departures and the reasons, where known
- Employee staff, compensation and any team structures within the firm
- Any non-solicitation or confidentiality provisions
Worker classification should be reviewed with qualified professionals. See our guide to real estate agent retention.
Licensing and Regulatory History
- The firm’s license and the broker of record or designated broker
- Branch or office licenses, where applicable
- Complaints, disciplinary history and regulatory audits
- Policies for supervision, advertising and record retention
See our article on designated broker licensing.
Trust and Escrow Accounts
If the brokerage holds earnest money, security deposits or rents, buyers should review reconciliations, bank statements and any audit findings with counsel and accountants. Our article on property management trust accounts covers this further.
Pending Transactions
Request a list of deals under contract and active listings, with the expected commission and the agent involved, and agree on how they will be handled at closing. See our article on brokerage pending transactions.
Franchise and Affiliates
- Any franchise agreement, its transfer provisions and the franchisor’s approval process
- Ownership and agreements for any title, mortgage, insurance or other affiliated businesses
- Referral arrangements, which may be subject to rules that counsel should review
Operations, Leases and Insurance
- Office leases, assignment provisions and renewal terms
- Technology subscriptions, websites, domains and lead sources the firm controls
- Errors and omissions coverage and claims history, reviewed with insurance professionals
- Pending or threatened litigation
Market and Concentration Review
Look at how results changed across stronger and slower years, which neighborhoods, property types or client groups drive activity and whether any single agent, developer, landlord or referral relationship accounts for an outsized share of company dollar. Concentration is not necessarily a reason to walk away, but it can affect price, structure and how a lender views the deal.
How Lenders Use Diligence
Lenders frequently ask for the same records a buyer reviews: tax returns, financial statements, agent production data, licensing details and a plan for the broker of record role. Organizing findings in a clear format can help the financing process, although timing and outcomes depend on the lender and the transaction.
US Professional Funding helps buyers finance the acquisition of existing, operating real estate brokerages and can help coordinate what lenders need from diligence. Learn more about our real estate brokerage acquisition financing.
