The specifics of commercial real estate closings tend to differ between each transaction, but there are similar overarching processes that necessitate strict attention. The presence of an experienced real estate attorney will ensure none of these factors are overlooked, but it’s best to keep yourself informed of the process.
This is why we’ve put together a quick checklist of the stages and factors that come into play during commercial real estate closings in Nashville.
As many people looking to purchase property know, the list price isn’t the extent of the costs. Commercial properties in particular can have expensive closing costs. This expense should be planned for and budgeted from the very beginning of the process. The exact amount of money needed for closing isn’t usually known at the time a possible buyer might make an offer, but the amount should be estimated.
A commercial real estate attorney can work with the lender to try to keep these costs as low as possible. However, the buyer should still plan on these costs stretching thousands of dollars.
Commercial buildings can be used for numerous purposes and often have numerous tenants. A clear history of leases should be provided prior to closing. And if the property was used for a singular business, operating statements for the previous three years should be provided.
Maintenance and planned improvements should all be documented and in the hands of the buyer. Encumbrances, easements, and anything else that might affect the property moving forward should be documented and provided.
Escrow refers to a neutral third-party that will hold funds for the transaction until either all of the requirements are met for the sale, or one of the parties pulls out of the deal. An escrow agreement will dictate the requirements needed for dispersal of the funds. This agreement is agreed upon by both the buyer and the seller prior to closing.
The escrow agreement outlines specifics such as the identity of the escrow agent. It also outlines the amount of funds held in escrow as well as acceptable ways the agent can use the funds.
It is the responsibility of the buyer to inspect all factors in the transaction. Everything that leads up to commercial real estate closings in Nashville can affect the specifics of the closing process. Anything that isn’t found before the papers are signed becomes the responsibility of the buyer. This includes:
- The seller
- Various obligations needed to satisfy the agreement
- Zoning restrictions
- Legal liability
The property itself should also be thoroughly inspected. As we said, any problems become the responsibility of the buyer once the closing process is completed. Costly repairs found prior to closing can be another reason for negotiations prior to closing.
The title commitment compiles all the applicable information on a property regarding its legal status and anything related to its ownership. In commercial real estate closings, a title commitment can supply some of the following critical information.
- The county where the property is located
- Property value for title insurance purposes
- Tax information
A title will also provide information regarding unreleased or open mortgages, ownership history of the property, and any legal issues involving prior or current owners. A complete legal description of the commercial property is also provided.
Environmental Site Assessment
This is another report that is put together prior to commercial real estate closings. An environmental site assessment outlines the existing and potential environmental impacts a property might pose.
Environmental issues can be a liability for the buyer.
Tests of the soil, water, and air are not typically performed for the initial phase of an environmental site assessment. However, if problems are found in the initial review of the property, a second phase of the assessment could be required. This second phase of the assessment goes deeper into testing the environmental deficiencies, if any, initially found on the property.
The deed is the document that officially transfers ownership of the property. Warranties frequently accompany the deed. These are sworn and signed statements guaranteeing that the seller holds the title to the property they are selling.
There are various types of deeds, and the transaction will dictate which type of deed is used. The warranties afforded to the buyer from the seller differ between the types of deeds. These documents can be anywhere from less than one page up to several pages long. They are legally-binding and are therefore usually prepared by a real estate attorney.