The number in a letter of intent is not a price. It is an estimate of what your portfolio is worth if everything you have represented turns out to be true. Due diligence is the process of checking, and every discrepancy it finds becomes a proposed price reduction. Buyers call this a retrade, and we want to be direct about it up front: retrading is not sharp practice at the margins of the business. It is the business. The diligence file is built to find reasons to pay you less, and a seller who understands that can prepare for it instead of being surprised by it.
The timing matters more than usual right now. Under the ROAD Act, institutional buyers can still purchase portfolios from sellers below the 350-home threshold1 through January 7, 20292, and not after. If you are considering a bulk sale inside that window, the buyer on the other side will run some version of the process below. Here is what they will look at, in roughly the order they look at it, and what we think you should do about each item before anyone signs anything.
Retrading works because of when it happens
The sequence favors the buyer, and you should see why before you enter it. You sign a letter of intent at an attractive number, usually with an exclusivity period. You stop talking to other buyers. Thirty to sixty days later, the diligence findings arrive as a list of problems with dollar figures attached, and the buyer proposes a lower price. At that point you are weeks in, your alternative buyers have moved on, and re-marketing the portfolio means starting over. Most sellers accept most of the reduction.
You cannot change the sequence. You can change what the findings list has on it, because almost everything on it comes from documents you already control.
Title and liens get checked first because they can stop everything else
The buyer's title company will search every parcel. They are looking for mortgages and lines of credit to be paid off at closing, mechanic's liens from contractor disputes, code enforcement liens, judgment liens against you or your entities, tax liens, and the surprisingly common unreleased lien: a loan you paid off years ago where the lender never recorded the release. They will also confirm that the entity on the purchase agreement actually holds title to each home, which trips up owners who moved properties between LLCs informally.
None of this is judgment territory. Title is binary, and a defect found in week five delays closing while you chase a release from a lender that may no longer exist. Order your own title search first. Clearing a stale lien costs a phone call in month one and a closing extension in month three.
The lease audit is where most price reductions start
The buyer will compare your rent roll against the actual signed lease for every home. Discrepancies are routine: a rent roll showing $1,650 where the lease says $1,600, leases that expired and rolled month-to-month without paperwork, a missing lease for a long-term tenant, concessions or side agreements that never made it into the file. Every home where the document does not support the rent roll gets underwritten at the lower number, or at market vacancy.
Security deposits get reconciled separately. The buyer inherits your deposit obligations, so they will total what each lease says was collected and demand a closing credit for the full amount, whether or not you still hold it in a separate account. If your deposit records are incomplete, the buyer's estimate fills the gap, and their estimate will not favor you.
Our advice is unglamorous: pull every lease, read it against the rent roll, paper the month-to-month tenancies, and reconcile deposits to the dollar before a buyer does it for you.
Payment history tells the buyer what the rent roll cannot
A rent roll shows scheduled rent. The buyer underwrites collected rent, so they will ask for 12 to 24 months of tenant ledgers and eviction filing history. They are measuring delinquency, chronic lateness, informal payment arrangements, and the gap between physical occupancy and economic occupancy. A portfolio that is 96% occupied but collects 88% of scheduled rent gets priced on the 88%.
If your ledgers live in a property management system, this is an export. If they live in a spreadsheet you reconstruct from bank statements, the buyer will discount for the uncertainty. Software records read as evidence. Reconstructions read as claims.
Condition gets priced line by line, not by impression
Expect inspections on every home or a negotiated sample, plus a specific focus on the components that cost real money: roof age, HVAC age, water heaters, electrical panels, sewer lines in older stock. The buyer's team builds a deferred maintenance table with a dollar figure per home, and that table becomes the core of the retrade conversation.
Your counter is documentation. A roof the inspector estimates at 18 years old is a deduction. The same roof with a 2019 invoice attached is not. Capital expenditure records with dates and invoices settle condition disputes in your favor, and their absence settles those disputes in the buyer's favor.
The files sellers forget: insurance, code, HOA, taxes, environmental
Five categories reliably surprise sellers because they sit outside the day-to-day of collecting rent.
Insurance loss runs. The buyer will request your claims history, both to underwrite insurability and because claims reveal problems (water losses, liability incidents) that inspections miss.
Code violations and open permits. Unresolved violations carry fines that travel with the property, and open permits mean unfinished or unapproved work. Both are searchable at the municipality, which means the buyer will find them whether you disclose them or not.
HOA status. For homes in associations, the buyer wants estoppel letters showing dues are current, and they will read the governing documents for rental restrictions and rental caps. An HOA that caps rentals can make a home unrentable to the next owner, and buyers price that risk hard.
Property tax reassessment. In many jurisdictions a sale triggers reassessment, so the buyer underwrites the tax bill they will pay, not the one you pay. Your low assessed value is not a selling point to them; it is an expense increase they will model. Understand this before you anchor on a cap rate computed from your current taxes.
Environmental flags. Pre-1978 homes need lead paint disclosures on file. Older properties get screened for underground oil tanks. Flood zone designations affect the buyer's insurance math. These are checklist items, not usually deal issues, but a missing lead disclosure is a compliance gap you want closed before diligence, not during it.
Building the file first is a negotiating position
Here is our actual point of view. Every gap in your records gets priced as risk, on the buyer's assumptions, at the moment you have the least leverage. A complete file, assembled before you go to market, does three things: it shortens the diligence period, it shrinks the list of findings a retrade can be built on, and it lets you fix the cheap problems (a stale lien, an unsigned renewal, a deposit ledger) while they cost a phone call instead of a price concession. The buyer's process does not change. What changes is how much of it you have already done on your own terms.
If a portfolio sale is anywhere in your plans before the January 7, 2029 transitional deadline2, start the file now. It is the highest-return work you can do on a portfolio without touching a property.
We keep this checklist as a downloadable document, organized by category with the specific records to pull for each item. Download the due diligence checklist and build the file before a buyer asks for it.