Keep these factors in mind if you are looking to buy or sell commercial property
Commercial real estate deals are, in most cases, more complicated than residential real estate transactions. They often involve much larger sums of money, different documentation and research, and they can create much greater liability for both parties.
These unique components often require the assistance of a licensed commercial real estate broker to ensure that a client’s best interests are always kept in mind, whether they’re a buyer or a seller. Let’s take a look at three key elements:
1. Contracts are highly binding
The state offers basic consumer protections for the buyer in most residential real estate deals, but the law takes a much more neutral approach when it comes to commercial transactions. Courts typically assume that both parties in a commercial sale are prepared to thoroughly analyze, understand, and negotiate all aspects of the contract. Therefore, judges are more likely to hold parties to the terms of a sales or lease agreement, absent any blatant fraud or illegality.
2. Commercial real estate is valued differently
Because of its nature, a certain commercial real estate property many not have a local, previous sales comparison. This can make it difficult to assess value when compared to residential properties, which have fairly accurate valuations based on a number of previous, similar sales.
Commercial real estate also has an income component that can add to its value. Typically, both the current and any future income streams are considered when determining valuation and the eventual sales price of a commercial property. But just like with residential real estate, buyers and sellers typically hire a professional appraiser to help set a fair market value.
3. Negotiations can be tougher, and require due diligence
Commercial real estate transactions often involve intense negotiations. During these efforts, the buyer seeks to determine facts that could impact the value and attempts to gain concessions from the seller to offset any problems that may be found. In addition to looking for physical defects or other tangible factors, any issues that could impact the revenue stream generated by the property are considered.
Buyers of commercial real estate are expected to conduct thorough due diligence. Unlike a residential real estate deal, where one inspector will likely suffice to assess the condition of a house, a commercial buyer may need to hire multiple inspectors and experts to look at a variety of different factors. These efforts could include:
- A building inspector to inspect the actual building
- A surveyor to ensure that all property lines are properly identified
- An environmental engineering & testing company to determine any environmental hazards
- A lawyer to review any title reports, land use entitlements, existing leases, and other legal issues
Contact a commercial real estate broker for help
Purchasing a commercial property can be complicated, and if you go into a transaction without the proper assistance, you could be in for more than you bargained for. At Morris Southeast Group, our team of experts has nearly three decades of experience and we are a leading provider of full-service commercial real estate services to clients in South Florida. Wherever you are in the transaction process, chances are that we can help. Give our team a call today at 954-474-1776, reach Ken Morris on his cell at 954.240.4400, or email kenmorris@morrissegroup.com for more information.
Tags: commercial real estate
