The myriad steps to close a commercial real estate deal – Press Telegram

Today I focus on the closing process for commercial real estate transactions. After all, it was foresight because I wrote this post before Labor Day weekend.

Regardless of whether you as an investor or resident depend on the rent earned or the ancillary costs of your business, you go through a similar process in order to become an owner. Let’s dive.

We search, select candidates to buy and start negotiations. With the clarification of the purchase conditions between buyer and seller, the contact purchase contract is concluded. This part is relatively easy. Now the fun begins. Buyer and seller now need to complete the transaction. What happens after a document is signed is the subject of this column.

Purchase and sale contracts, whether standard or proprietary, provide a roadmap for how to proceed. Pricing, financing, due diligence if any, trustees, ownership companies, start-up deposits, post-contingency security deposits and notice periods are all in a niche.

Price. It’s pretty simple, but it’s usually a combination of cash and debt. The seller receives all revenue unless he offers a loan. After entering the certificate, there are fewer closing costs. Can this amount deviate from the agreed amount? Yes sir. See due diligence.

Financing. Many of the transactions we see these days have been funded but do not require approval from the lender. confusing? Yes sir. But this seller market that we are plagued with created that fold. The seller can say, “Sure, buyer, I’ll take out the loan. However, if you don’t qualify, you won’t be able to quit. And if the lender is late – tacos. “

In a more general approach, the buyer seeks credit income combined with their cash injection to make a purchase. If she cannot get the loan, she will leave and her deposit will be refunded.

Crooked. Generally, California trusts are information centers for contract acceptance and symphony conducting. This is also known as running a transaction. Deposits, documents, and closing instructions are all neatly incorporated into the escrow owner’s job.

Title. Most title companies also have an escrow department, but in many cases these two functions are separate. The title clerk prepares a preliminary title report at the beginning of the transaction. This shows loans, easements, liens, property tax payments, legal statements and other “exceptions” that the seller must repay. A commitment is made to guarantee a clean title. If there is a problem, it will be covered after closing it.

Down payment to open the escrow account. There are no actual standards in trade. It’s everything buyers and sellers negotiate. However, these usually bear around 3% of the purchase price. In most cases the deposit will be refunded if the buyer does not continue with the purchase and decides before the event is exempt.

due diligence. It is also known as an “unforeseen event” and lasts between 15 and 90 days, with a lot of work to be done. Securing funding, approving property exemptions, performing building inspections (roofs, electricity, HVAC, etc.), preparing deeds of ownership, analyzing tenant financial aspects (if any), environmental hygiene needs to be diagnosed. Ouch! Within each of the main categories of admission there is a checkpoint that guides us at the end.

Financing includes, for example, buyers, tenant loans, assessments, environmental reports, and lender approval. There are many things to do in a short period of time. What if something is not approved? Dear Readers, that is the subject of another column.

Deposits after release from contingent liabilities. You travel the gauntlet of unforeseen circumstances and move forward at full speed. Next, add a “skin” with an increased amount to the escrow account. By the way, purchases generally require down payments. However, if you nod, the deposit will not be refunded. Can you still cancel? Of course. But it’s not free.

close. A chord dissonance completes the transaction. Like a group photo at a family reunion, everyone has to look at the camera and smile before taking the picture. The lender finances the loan and the buyer adds additional dollars, deposits and posts the certificate, and assigns the money. The seller gets it, the buyer gets the title, the lender gets the trust deed, and the broker gets the commission. Boom!

Allen C. Buchanan of SIOR is a director of Orange Lee & Associates Commercial Real Estate Services. He can be reached at [email protected] or 714.564.7104.

The countless steps to concluding a commercial real estate deal – press telegram source link The countless steps to concluding a commercial real estate deal – press telegram