Due Diligence Red Flags — A Denver Buyer Guide
The inspection is only one part of due diligence. There is a broader layer of research that every buyer should do before committing to a purchase — and some of it has nothing to do with the condition of the house itself.
These are the things I watch for. Some are deal breakers. Most are not. All of them are worth knowing about before you close.
A red flag is not always a reason to walk away. It is a reason to ask the right questions, get the right information, and make sure you are going into the transaction with your eyes open.
No Property is The Same & No Buyers Goals are the Same.
During the due diligence period there are things that may be important to you that go beyond the inspection itself. Now is the time to do your research on your future property.
What matters to one buyer may not matter to another. The items below are worth looking into — my job is to make sure you know what to look for, where to find it, and what questions to ask before you commit.
Soil conditions and foundation issues
Colorado soil is not forgiving — and not every builder who has worked here has respected that.
Certain areas in the Denver Metro have widespread foundation issues that trace back to the original construction. Some builders did not properly account for Colorado’s specific soil conditions — particularly bentonite, an expansive clay soil that swells significantly when it absorbs moisture and shrinks when it dries out. Add in the freeze and thaw cycles that come with Colorado winters, and you have conditions that can put serious stress on a foundation over time.
This is not always visible during a standard showing. It may not even show up clearly on an inspection report without a closer look. What matters is knowing which areas and which developments have a history of these issues — and making sure the right eyes evaluate the foundation before you close.
If a foundation concern is flagged, that is the signal to bring in a structural engineer, not just a general inspector. An engineer can tell you whether what you are seeing is cosmetic, something to monitor, or a genuine structural problem that needs to be addressed.
This is one of the most Colorado-specific issues there is. It is also one of the most important.
Title — easements and first right of purchase
A title search is a standard part of every real estate transaction, but buyers do not always understand what it is actually looking for — or what it can find.
Two things I pay particular attention to:
Easements. An easement gives another party — a utility company, a neighbor, a municipality — the legal right to use a portion of your property for a specific purpose. That might mean a utility line runs through your backyard, or that a neighboring property has legal access across part of your land. Easements do not always prevent you from buying the property, but they can absolutely affect what you are able to do with it. You need to know they exist before you close, not after.
First right of purchase. In some situations, another party holds the legal right to purchase the property before you can complete the transaction. This is less common in residential real estate but it does come up — particularly with certain investment properties, some condos, or properties with existing agreements in place. If a first right of purchase exists, it needs to be identified and understood early in the process.
Title issues are exactly why title insurance exists — but insurance does not change what is already attached to the property. Understanding what you are buying is always the better first step.
HOA restrictions — what you can and cannot do
If the property is in an HOA, the restrictions that come with it are not optional — and they are not always obvious from a showing or a listing.
Some of the things HOA documents can restrict:
Rentals. Many HOAs limit or prohibit short-term rentals entirely, and some cap the number of long-term rental units in the community. If you are buying as an investment property or plan to rent the home at any point, this needs to be checked before you are under contract — not after.
Vehicles. Some HOAs have strict rules about where cars can be parked, whether RVs or campers can be stored on the property or in the driveway, and what types of vehicles are permitted at all.
Exterior changes. Fences, paint colors, landscaping, additions — many HOAs require approval for changes to the exterior of your home.
Pets, signage, holiday decorations — the list can go longer than most buyers expect.
I always encourage buyers to read the HOA documents carefully during the due diligence period. What feels like a minor restriction on paper can become a significant frustration once you are living there.
HOA finances and meeting minutes
The restrictions are only half of the HOA picture. The finances matter just as much — and they are often overlooked.
A poorly managed or underfunded HOA is a risk. If the reserve fund is low and a major repair comes up — a roof on a common building, a parking lot, an elevator — the HOA may issue a special assessment. That means every homeowner gets a bill, sometimes a significant one, with little warning.
I recommend requesting the last six months of HOA meeting minutes as part of due diligence. Those minutes will often tell you things the financials alone will not — upcoming projects, ongoing disputes, deferred maintenance, changes to rules or fees that are being discussed but have not been voted on yet.
If something significant is coming, the minutes are usually where you will find the first signs of it. That is information you want before you close, not six months after.
Homeowners insurance and the CLUE report
Homeowners insurance is not something most buyers think about until they are close to closing — and by then, surprises can be costly.
Two things every buyer should be aware of:
The CLUE report. CLUE stands for Comprehensive Loss Underwriting Exchange. It is a report that shows the insurance claims history on a property — typically going back seven years. What makes this important is that it shows claims that were filed even if the repairs were never completed. A seller may have filed a claim for water damage, received a payout, and never actually fixed the problem. The CLUE report can surface that. It is worth requesting as part of your due diligence.
Insurance costs. In Colorado, homeowners insurance has become a significant line item — particularly for homes with older roofs, prior claims, or in areas with elevated hail or weather risk. Insurance costs can make a meaningful difference in your monthly payment, and rates can vary considerably from one property to the next. I recommend getting an insurance quote early in the process, not at the last minute, so there are no surprises when you are calculating what you can actually afford.
Permits on major work
If a seller has done significant work on the home — a finished basement, an addition, a deck, an electrical upgrade, a new HVAC system — one of the questions worth asking is whether that work was permitted.
Unpermitted work is not automatically a deal breaker. But it is something to understand before you close.
Permits exist for a reason. When work is done with a permit, it is inspected and has to meet current building codes. When it is done without one, there is no guarantee it was done correctly — and no record that anyone checked. That can affect safety, insurability, and your ability to sell the home down the road.
It can also become your problem. If unpermitted work is discovered after closing, the cost and responsibility of addressing it falls on you as the new owner.
Some sellers do not pull permits because it is faster and cheaper not to. That does not mean the work is bad — but it does mean it is worth having the right eyes on it during the inspection period. And in some cases it may be worth negotiating with the seller to address the permit situation before ownership transfers.
The future of the area — county plans and surrounding development
You are not just buying a home as it exists today. You are buying into whatever the surrounding area is going to become.
This is something buyers rarely think to research — and it can matter a great deal.
County and municipal planning documents, zoning records, and public meeting minutes can tell you a lot about what is planned for the land and properties around the home you are buying. An empty lot nearby could be zoned for commercial development. A quiet road could be on a future expansion plan. A neighboring parcel could be slated for high-density housing.
None of this is secret information — it is public record. But most buyers never look at it.
I encourage buyers to take a broader look at the area during the due diligence period. Check what is being proposed at the county level. Look at what is zoned around the property. If the neighborhood is part of an HOA, the meeting minutes will often reflect discussions about nearby development or changes coming to the community.
The goal is not to find a reason to walk away. The goal is to make sure the life you are imagining in that home lines up with the direction the area is actually heading.
Crime data and sex offender registry
Most buyers do not think to research crime data until after they have already fallen in love with a house. Do it earlier.
There are several tools worth using during the due diligence period:
Family Watchdog is one of the most widely used tools for locating registered sex offenders near a specific address. Enter the property address and it will show you a map of registered offenders in the area. This is public information — Colorado follows Megan’s Law requirements and the registry is publicly accessible — but Family Watchdog makes it easy to visualize.
The Colorado Bureau of Investigation (cbi.colorado.gov) maintains the official state sex offender registry if you want to go directly to the source.
For general crime data, the Denver Police Department publishes a crime map at denvergov.org that shows reported incidents by neighborhood and type. Many surrounding municipalities — Aurora, Lakewood, Arvada, Englewood — have similar tools on their own city websites. SpotCrime (spotcrime.com) and CrimeMapping are also useful aggregators that pull from local law enforcement data.
No neighborhood is going to show zero incidents — that is not the goal. The goal is to understand the pattern, the frequency, and the types of activity in the area so you are making an informed decision about where you are choosing to live.
The due diligence timeline — dates and deadlines that protect you
When you go under contract in Colorado, you sign the CBS1 — the Colorado Contract to Buy and Sell Real Estate. Inside that contract is a table of dates and deadlines. Most buyers glance at it and move on. That is a mistake.
These deadlines are not suggestions. The contract says it plainly: time is of the essence. That means every deadline is strict and absolute. If you miss one, you may lose a right you did not even know you had — including the right to get your earnest money back.
Here are the key deadlines to understand and act on:
Inspection Termination Deadline. This is your last day to walk away from the contract entirely based on the inspection — no specific reason required, no negotiation needed. Miss this deadline without delivering a written notice to terminate, and you lose the right to terminate for inspection reasons.
Inspection Objection Deadline. This is your deadline to deliver a written list of items you want the seller to address. Once you deliver an objection, the termination deadline above expires — you are now in negotiation mode.
Inspection Resolution Deadline. If you and the seller have not reached a written agreement on inspection items by this date, the contract terminates automatically. Pay attention to this one.
Title Deadlines. You have a deadline to review title documents, a deadline to object to anything unsatisfactory, and a deadline for the seller to resolve any title objections. Each one builds on the last.
Association Documents Termination Deadline. If the property is in an HOA, you have a specific window to review all HOA documents — financials, minutes, rules, restrictions — and terminate if anything is unsatisfactory.
Property Insurance Termination Deadline. You have the right to terminate if you cannot obtain homeowners insurance on acceptable terms. In Colorado, where insurance has become increasingly complicated, this deadline matters more than it used to.
Loan Deadlines. Several deadlines govern your financing — when your loan application must be submitted, when loan terms must be acceptable to you, and when your loan must be approved and available. Missing these can put your earnest money at risk.
Appraisal Deadlines. If the home appraises below the purchase price, you have a window to object, negotiate, or terminate. That window has a hard close.
The bottom line: when you receive the contract, I will walk through every deadline with you. We will put them all on a calendar so nothing slips. These deadlines exist to protect you — but only if you use them in time.
Due Diligence is not just the inspection. It is the full picture.
All of it. The property, the title, the HOA, the insurance, the permits, the neighborhood, and the direction everything around it is heading.
Most of this information is available if you know where to look and what to ask for. My job is making sure we ask the right questions at the right time — before you are committed, not after.
Have questions about a specific property?
Every situation is a little different. If something has come up in your search that does not feel right, I am happy to talk it through.