Commercial property investment has become one of the most lucrative investments in real estate with long-term and significant benefits. However, ensuring the contract is valid, legally enforceable, and beneficial to the business is a major concern even for the most experienced property investors. Hence it is important to understand the basics and mistakes to ensure a good return on investment. Here are some do's and don'ts to consider before signing a commercial real estate purchase agreement.
Do Try Patience
Most investors go into an investment out of haste just because the property just because it seems good. Lack of a good plan leads to purchasing a property that doesn't suit you. Keep your eye on the market as long as it takes to find the right investment.
Don't Fall in Love Too Easily
When you see a property on lease or sale, don't gush about how perfect it is in front of the owner or broker. This hardens the price and makes negotiating difficult because you have given the owner the upper hand.
Do Note who's Responsible for the Closing Costs
Before signing the commercial purchase agreement, include terms about the closing costs, including notary fees, transfer tax, title search fees, escrow fees, etc. Will you or the seller cover the closing costs, or will you split the costs (and how will they be divided)? You should also note how the commercial purchase agreement outlines how to pay special assessment fees, property taxes, and other costs.
Do Know What's Included in the Sale
Know whether the property items are included or not in the transaction. This part is often overlooked, as most buyers assume these items are always included in the commercial purchase agreement. You may include window treatments, stoves, refrigerators, washing machines, light fixtures, and other times necessary to include in the transaction.
Do Pay Attention to Disclosures
Though less frequently used, they are necessary, especially regarding your health and safety. Depending on your state, ensure the seller discloses radon gas, termite damage, wells, lead paint, and similar property conditions. Most states do not allow sellers to conceal defects they are aware of. For instance, in New York, the seller is liable to you for any damages if they result from actively concealing a defect.
Don't Think You Can Make Quick Cash
This is especially the case for first-time investors, only to realize they have gone into liquidation in a small span of time. This is possible within the first few months of signing the commercial purchase agreement. To avoid such a loss, you should learn and understand the challenges of commercial investment.
Do Your Research
Before signing the commercial property agreement, find out more about the owner – there have been several cases of buyers purchasing properties from people who are not the right owners. Signing a commercial purchase agreement means entering into a business partnership together; therefore, it is crucial to know who they are, their financial situation, and how they are faring with their payments. Also, take your time to analyze the area to find the right home for your business.
Don't Overlook Compliance with Loan Commitment Requirements
After having all the signatures, confirm compliance with the requirements of loan commitments. Otherwise, the purchase will not close. Specifically, search for confirmation on liens or encumbrances, outstanding taxes, updated survey reports, and zoning compliance.
Tip: In case of non-compliance, hire an attorney to negotiate necessary elements in the loan documents.
Navigate Commercial Purchase Agreement with John Rochford
Regarding commercial purchase agreements, these do's and don'ts can make or break your transaction. With a real estate expert like John Rochford by your side, you can rest assured that you will be armed with the knowledge and expertise, giving you an edge in the commercial purchase agreement.
Contact us today to schedule a consultation and secure your future in commercial real estate.
