Typically the closing process for commercial properties is much longer than residential closing. For example, a residential mortgage closing may take as long as 30-60 days from the contract to close. Commercial transactions take additional time because of the more essential details. For example, the property owner buys an existing commercial property to expand their business or purchase raw land to develop. In addition, during commercial transactions, many inspections and extra considerations are part of the closing process, more than residential transactions. First, the buyer and seller formally begin negotiations.
“Inspection period”
They then may formalize terms with a letter of intent, this basic agreement both parties agreed upon, and then start establishing the contract to iron out the additional details. Thus, commercial contracts will not follow the standard form usually in residential realtors’ reviews. Instead, real estate attorneys draft and customize commercial contracts because many changes and negotiations often occur. Once the contract settles and all parties approve and signs it, this initiates an “inspection period,” which is similar to the residential “due diligence period.” The “inspection period” starts all the necessary inspections to ensure the buyer receives a commercial property used for its intended purpose.
The inspection protects buyers from putting down a large amount of capital and getting the up-to-date condition of the property. The assessment can assure the intended purpose fits the buyer and has the flexibility to back out. But if the intended purpose is no longer ideal. During this period, the buyer can choose to proceed to close or not. Furthermore, a title agent completes a title search to investigate any title objections. The title search allows the seller can correct problems delivering a clear title to the new owner. A recommendation would be for a property owner to complete a survey, especially for commercial transactions. There are many unknowns. Such as access to the property, parcel conflicts, environmental studies, and watershed restrictions (if applicable) affect property owners’ usage.
Zoning Permits
Finally, an essential process of a commercial transaction is zoning. Residential properties usually occur in the correct zoning parcel. Still, if a real estate investor reviews a commercial property but later becomes informed, the zoning doesn’t permit their business. Buyers would no longer have the ability to build or expand on that land designated for other zoned properties. When the inspection period ends, you proceed to close. Lenders, buyers, and sellers work together to finalize the real estate transaction. Then, it’s then recorded at the county’s recorder of Deeds where the property resides.
