NNN Basics
The NNN due diligence process explained
Once a Purchase and Sale Agreement is signed, the transaction enters its due diligence period, the window where everything represented in the offering memorandum and lease gets independently verified.
This article walks through how that process actually unfolds, phase by phase.
Key takeaways
- Due diligence runs through seven overlapping phases, from kickoff through final closing preparation.
- Document review, physical/environmental investigation, and financing all run largely in parallel.
- The estoppel certificate is typically finalized close to closing so it reflects the current lease status.
- A straightforward NNN property typically takes 30 to 45 days of active due diligence.
- Coordinating attorneys, lenders, and inspectors is where an experienced buyer’s broker adds the most value.
Phase 1: Kickoff (Days 1-5)
As soon as the PSA is signed, several things typically happen in parallel:
- The earnest money deposit is delivered to escrow
- Title and survey are ordered
- The lease and any related documents are formally requested (if not already provided)
- Your lender (if financing) begins its own underwriting process
- An estoppel certificate request is sent to the tenant
Phase 2: Document review (Days 5-20)
This is where your broker and attorney dig into the substance of the deal:
- Lease review, confirming expense responsibility, escalations, guarantee structure, and renewal terms match what was represented (see “How to Analyze an NNN Deal“)
- Financial document review, any available tenant or guarantor financials
- Title report review, identifying any liens, easements, or encumbrances that need to be addressed before closing
- Survey review, confirming boundaries, easements, and any encroachment issues
Phase 3: Physical and environmental investigation (Days 15-35)
- Property condition assessment, evaluating roof, HVAC, structure, and parking lot condition, particularly important if any of these remain a landlord responsibility
- Phase I Environmental Site Assessment, reviewing historical land use for potential contamination risk
- Zoning verification, confirming the property’s zoning supports the tenant’s current and continued use
Phase 4: Financing progress (runs in parallel, Days 1-45)
If you’re financing the purchase, your lender’s underwriting typically runs the entire length of due diligence, including:
- Appraisal
- Lender’s own review of the lease and tenant credit
- Loan committee approval
- Final loan documentation preparation
Phase 5: Resolving issues (as needed)
If due diligence uncovers a problem, a title defect, an unexpected repair need, a discrepancy between the lease and what was represented, this is the stage where it gets negotiated: a price adjustment, a seller credit, a required repair before closing, or in some cases, a decision to terminate the agreement.
Phase 6: Estoppel certificate finalization (final 1-2 weeks)
The signed estoppel certificate from the tenant, confirming the current lease terms, rent, and that there are no unresolved disputes, is typically finalized close to the closing date, since it needs to reflect the most current status of the lease.
Phase 7: Final closing preparation (final week)
- Closing statement prepared and reviewed
- Final loan documents signed, if financed
- Remaining closing costs and prorations confirmed
- Title insurance policy finalized
Who’s involved at each stage
- Your buyer’s broker coordinates the overall process and flags issues as they arise
- Your attorney reviews legal documents and negotiates resolution of any issues
- Your lender (if financing) runs its parallel underwriting process
- The title company manages title and closing logistics
- Third-party inspectors and environmental consultants conduct physical and environmental assessments
How long does this actually take?
For a straightforward NNN property with a clean lease and no major issues, 30 to 45 days of active due diligence is typical, though total PSA-to-closing timelines (including financing) often run 45 to 60 days. Complications, title issues, environmental concerns, financing delays, can extend this meaningfully.
Why a coordinated process matters
Due diligence involves several parallel workstreams that all need to land around the same closing date. A buyer managing this alone, without an experienced broker coordinating the pieces, risks delays or missed details simply due to the number of moving parts involved.
Frequently asked questions
How long does NNN due diligence typically take?
For a straightforward property, active due diligence typically runs 30 to 45 days, with total PSA-to-closing timelines often reaching 45 to 60 days once financing is factored in.
Why is the estoppel certificate finalized so close to closing?
It needs to reflect the most current status of the lease, including rent and any unresolved disputes, so it’s typically completed in the final one to two weeks before closing.
What happens if due diligence uncovers a problem?
Issues are typically negotiated through a price adjustment, a seller credit, a required repair before closing, or in some cases, a decision to terminate the agreement.
Does financing run separately from due diligence?
No, it runs in parallel. Lender underwriting, including appraisal and loan committee approval, typically spans the entire due diligence period rather than starting after it.
Let us manage the coordination for you
QEM Estates actively manages the due diligence process for clients, coordinating attorneys, lenders, and inspectors so nothing falls through the cracks.