Closing on commercial real estate purchases involves each party being aware of their duties. There are not as many regulations for commercial real estate sales as there are for residential sales, so it is up to the buyer and seller to ensure the deal is good by going through four steps.
1. Authority Verification
Because commercial purchases are often on behalf of a business or group of investors, there has to be a formal agreement on who has the authority to sign the legal documents that are part of the process. Property metrics explains authority verification is simply getting an agreement on who can legally sign documents on behalf of all the buyers or sellers.
2. Due Diligence
Due diligence is the process of checking out the details of the transaction. Since laws concerning commercial real estate are not as strict as those for residential real estate, there may be some information the parties fail to provide to each other. It is up to each party to make sure they understand the deal completely, including any issues, which means it may be a good idea to consult with a commercial real estate attorney Austin.
Escrow is the process of paying money upfront to secure trust between the seller and buyer. There is an escrow agreement that controls the process and gives conditions to meet to come out of escrow and complete the sale. It will also cover how to back out of the deal should one party want to leave.
4. Document Finalization
The actual closing of the deal comes when both parties sign all documents and there is a transfer of payment. At that time, everything is final and the buyer takes possession of the property as the new owner.
Making the Purchase
The process of closing a commercial real estate deal is often more complex than a residential deal because of the type of property and the types of buyers and sellers involved. It is important to understand for those new to this industry.