Published by Forbes.com | August 10, 2024
When selling commercial property, learn the steps to take to ensure a smooth closing process which includes finalizing negotiations and signing contracts.
If you’re selling commercial property, you’ll want to be ready for the contract and closing process. This involves working with the right team and gathering the needed information ahead of time. When the preparation for these steps is carried out well, the closing can go smoothly and help you get the maximum price for your building.
Follow these guidelines to get ready for the contract and closing of your commercial property:
1. Choose the Right Attorney
While you may have worked with an estate or family attorney in the past, consider looking for a specialist when selling property. As I mention in Step 2 of my book, The Insider’s Edge to Real Estate Investing, it’s important to hire a real estate attorney who understands the nuances of commercial property transactions. They can help you in drafting the contract, negotiating terms, and managing any potential legal issues that may arise. If they live in the area, they will understand the local regulations, such as mortgage recording taxes or zoning laws. Look for an experienced attorney who has a pragmatic approach to help you navigate the contract and closing.
2. Gather Clear Documentation
Your broker may ask you to share information about the property such as leases, floor plans, property condition reports, and environmental reports. Providing as much documentation upfront as possible can help expedite the due diligence process for potential buyers. Others will appreciate the transparency, and it could help you to avoid issues during the negotiation and closing stages.
3. Provide Disclosures as Needed
In commercial real estate, you’ll find there are generally fewer requirements for disclosures than in residential transactions. However, you’ll want to plan on sharing any known issues about the property. You can work with your attorney to see what legal obligations and mandatory disclosures will be needed for your asset class. They can guide you and help you prepare any documentation to comply with legal requirements.
4. Negotiate the Terms
You can work with your team to set up the deposit amount, closing period, and any contingencies. A standard practice in New York is to require a 10% non-refundable deposit, which provides security for the seller and demonstrates the buyer’s commitment. If it’s important to sell within a certain timeframe, you can include a “time of the essence” clause. With this, the buyer will be obligated to close by a specific date.
