What Does a Typical Commercial Real Estate Transaction Look Like?
Commercial real estate transactions are similar to residential real estate deals. There are differences in the details, lending, and some of the legal work, but generally a commercial real estate deals includes the following steps:
- Initial discussions and negotiations: The process typically starts with the buyer expressing interest in a property and entering into negotiations with the seller. The parties may exchange letters of intent or term sheets outlining the general terms of the deal. The deals can be found by the buyer or buyer brokers. The deals can be listed or an off-market/pocket listing that are not public.
- Due diligence: Once the parties have agreed to the general terms of the deal, the buyer typically conducts due diligence on the property. This may include reviewing financial and operating records, conducting inspections and appraisals, and obtaining title and environmental reports.
- Purchase and Sale Agreement: Once the due diligence is complete, the parties will negotiate and sign a Purchase and Sale Agreement (PSA), which outlines the specific terms of the deal, such as the purchase price, closing date, contingencies, and other important details.
- Financing: The buyer may obtain financing for the purchase of the property, either through a loan or through other means such as joint venture or crowdfunding.
- Closing: Once all of the contingencies in the PSA have been satisfied or waived, the parties will schedule a closing date. At closing, the buyer will typically pay the purchase price and the seller will transfer ownership of the property to the buyer. The parties will also execute various closing documents, such as deeds, bills of sale, and other legal documents.
- Post-closing: After the closing, the buyer will take possession of the property and assume responsibility for its operation and maintenance. The seller may also be required to take certain post-closing actions, such as delivering certain financial statements or other documents.
Of course, the specific details of each commercial real estate transaction will vary depending on the property, the parties involved, and the terms of the deal. The process can be complex and involve many legal and financial considerations, so it’s important to work with experienced professionals such as attorneys, real estate brokers, and accountants throughout the process to help ensure a successful outcome.
The information provided is for educational purposes only and does not constitute legal advice.