The Commercial Real Estate Closing Process

The commercial real estate closing process is complex and, at times difficult.

Going over the four steps that comprise the process, and working with a lawyer, will make it easier for you to go through the process in an easy, and effective, manner.

What Is Commercial Real Estate?

The definition of “real estate” is, quite simply, a piece of land, such as a house or a building. With this definition in mind, commercial real estate is a piece of land that is meant to be used solely for commercial purposes.

Some examples of commercial real estate are as follows:

• An open-air space that can be used as a car repair shop.
• A single floor, within a skyscraper, that can be used as an office.
• A space that can be used as a grocery store.

Every single one of the above serves as an example of what, exactly, a piece of commercial real estate is.

What Is A Closing Process?

Right before we go over what a closing process is, let’s define what closing is. And, with that in mind, closing is the culmination of a particular transaction or contract.

Given the definition above, a closing process is a process that allows a particular transaction or contract to come to an end.

Many transactions/contracts rely on elaborate closing processes, to ensure that the transaction/contract is concluded in a manner that benefits both parties.

What Is The Commercial Real Estate Closing Process?

The commercial real estate closing process is a process that, in fact, contains several other processes. Each one of these processes is absolutely essential in ensuring that you, and the other party involved in the transaction, receive what it is that you are looking for and what you are entitled to.

Step 01: Write A Letter Of Intent

To begin the process, you must write a letter of intent. A letter of intent is a document that clarifies the facts of the transaction, as well as any other pertinent information.

Some of the most important facts you must clarify, within your letter of intent, are as follows:

• Who you are and who the other party is.
• Where the commercial property is located.
• The price that you and the other party have agreed upon.
• The amount of money that must be deposited.

Outside of those facts, there are other facts that you can include. But, it isn’t always easy to determine what those facts are, which is why it’s often wise to speak with a commercial real estate lawyer that can help you write your letter of intent.

Step 02: Draft The Agreement

Right before a commercial real estate transaction can be conducted, both parties must sign a purchase and sale agreement. This agreement will be drafted by the seller, who owns the property.

A wide variety of details must be clarified within this purchase and sale agreement. Some of the most notable details include key details regarding the features of the property as well as agreed upon inspection periods.

Soon after the purchase and sale agreement has been drafted, the buyer can sign it. But, they shouldn’t do so just yet, as there are two more important steps in the commercial real estate closing process.

Step 03: Conduct A Due Diligence Review

A due diligence review is a thorough review that allows a buyer to uncover information regarding the condition of commercial real estate property they are about to buy.

Some of the problems that can arise if a due diligence review is not conducted are as follows:

• Structural issues that will cost a lot of money to fix.
• A title that has encumbrances and liens on it.
• The seller does not, in fact, own the property and cannot legally sell it.

Even though some of these problems are uncommon and unlikely, conducting a due diligence review ensures that these problems are not present and that you, if you are the buyer, won’t have any expensive problems to deal with.

Step 04: Sign The Closing Documents

To conclude the commercial real estate closing process, the buyer and seller will need to sign a variety of documents. Some of these documents are as follows:

• A Bill of Sale.
• A commercial lease.
• A transfer deed.

Outside of these closing documents, any funds that have been placed in escrow will be transferred, as per the escrow documentation that was developed earlier in the process.

Speak With A Commercial Real Estate Lawyer

Going through the commercial real estate closing process requires a thorough understanding of commercial real estate law and, in turn, the workings of a commercial real estate transaction.

Speak with a North Carolina commercial real estate lawyer today. We will assist you in going through the commercial real estate closing process in a manner that satisfies your needs and aims.