Closing a commercial real estate deal is a major step in the right direction if you want to sell or buy a property. Whether you’re a buyer or seller, it’s important to have your attorney there to help you through this process, since there is a potential to see significant losses if a mistake is made.
The closing for a commercial property has four major steps. These include:
- Putting money in escrow
- Dealing with two or more legal entitles (such as an LLC or LLP)
- Completing due diligence on the property
- Performing a title search and signing the closing documents
Each of these steps is very important to closing the deal effectively and efficiently.
Why do you need to put money in escrow?
Putting money in escrow shows that a buyer is serious about making a purchase. Escrow allows a third party to hold funds until the requirements of the escrow agreement have been met. If there are any problems at all, the money in escrow is held indefinitely.
What’s different about dealing with LLCs or LLPs rather than a person?
With an LLC or LLP, there are extra steps that your attorney will make to verify their ability to complete the transaction. If there is a question about whether or not one of the representatives can complete the transaction due to any reason, then your attorney will need to do more digging to see if the sale or purchase can be completed.
Performing due diligence on the property
Whether you are a buyer or seller, it’s a good idea to do your due diligence and to make sure the property is free of defects that could lead to a lawsuit later on. Commercial purchases and sales aren’t protected by law in the same ways as residential sales and purchases, so keep that in mind.
Completing the transaction to finish out the sale
In the end, checking the title with a title search to make sure it’s clear and signing the closing documents is still necessary, just like with a residential purchase. Once you do this, the sale is usually finished, so your attorney will want to be there to make sure everything looks right and is legally binding.
These are four steps to remember if you’re buying or selling commercial property. Your attorney can help you whether you’re negotiating, looking at a short-sale purchase or are interested in unique types of properties.