Selling or purchasing commercial real estate can be a world different from residential real estate. However, there are steps between placing an offer and finally having the keys in your hands. You may need to wait for a property inspection, completed appraisal, attorney approvals, and more.
Hoegen & Associates is here to help you understand the mishaps that may occur during a commercial real estate transaction. Knowing what to do if a commercial real estate sale goes wrong will allow you to handle any issues quickly and efficiently to move on with the transaction or back out.
Discovering An Issue in the Inspection
During a commercial property sale, we highly encourage obtaining an inspection to ensure the safety and stability of the building. We believe it is an essential part of the transaction. An inspection is critical for a seller to determine their property’s value and give potential buyers peace of mind. You can identify any possible repairs, renovations, or problems.
Not inspecting your commercial real estate before listing could cost you a hefty purchase offer or a potential negligent situation. Problems with the property may deter a buyer from purchasing the property or may significantly impact the purchase offer price. As a buyer, some things to check for during an inspection include:
- Safety and Fire Protection
- Structural Stability
- Mechanical and Electrical Systems
- Air conditioning, Ventilation, & Heating
- Vertical transportation (elevators, lifts, escalators)
If a seller fails to disclose any of these issues or other defects, you can sue the seller if your attorney can prove that the seller was aware of the problem.
Buyer Cannot Obtain Financing
Commercial real estate can be pricier and much different to deal with than residential real estate. The last thing you need is to find out your buyer doesn’t have the funds to purchase or lease your property. It’s important not to be discouraged if this happens. You must stay optimistic about the pricing and status of your property.
With any real estate transaction, it can be risky to rely on one individual’s purchase of a property before seeing proof of financing. Real estate agents can struggle with finding prospective clients. Financial information is usually accessible for nonprofit clients, but smaller and private businesses may be reluctant to share their information.
When it comes to finding the right buyer for your property, some things you may want to consider are:
Establishing potential buyers’ loan qualifications
Wait until the loan contingency is removed
Don’t make any rash movements until the loan documents are signed and officiated.
Closing Before Zoning is Approved
When it comes to commercial real estate, obtaining permits and establishing zoning are essential components of every transaction. However, obtaining a change in zoning before closing or receiving a specific use permit can be difficult for any owner. It often encompasses fees for the potential buyer and a lot of back and forth between departments.
Alternatively, closing before zoning approval is granted can be an even more expensive problem. If the zoning or permit is not obtained by the time of closing, the buyer could potentially face an extensive increase in property taxes, leading to losing the property. To avoid any of these consequences, we recommend that zoning paperwork be filed as soon as possible to save you time and money in the end.
If you have questions regarding zoning and need legal assistance in obtaining permits, please don’t hesitate to contact our team at Hoegen & Associates.
Missing a Complete Title Report
Title discrepancies can cause a spiral of issues in any real estate transaction, residential or commercial. It is essential that a chain of title is obtained and any problems are dismissed before putting your commercial property up for sale to avoid discrepancies down the road. A complete, clear title shows that your property is free from liens, claims, and other legal questions about ownership.
You may not be sure about your property’s legal status, which is why you should conduct a preliminary title search before a potential buyer orders one and finds issues first. Issues such as unpaid utilities, mechanic liens, secondary loans, and more might be lingering within the property title without your knowledge. Some commercial real estate property owners hire title clearing companies to handle this.
You can get a full title report done for your commercial real estate property with a title company and ensure a favorable deal to come your way when you list your property.
The most frequent issues during a real estate transaction are legal problems that arise in the documentation. These issues can range from inadequate legal descriptions for properties to mistakes in drafted contracts. Fortunately, our team at Hoegen & Associates is here to advise you on how to correct these issues.
You should never talk about the deal and start moving things before the deal is under contract or a lease is signed — situations can always change. Whether you encounter zoning and land use issues or preexisting environmental hazards that you are now responsible for, legal problems can arise anytime throughout the real estate transaction.
If you feel you may have a legal issue, such as a title defect, warranties, liability situation, etc., our team at Hoegen & Associates can help you understand and resolve the problem.
Legal Assistance Can Save You Time & Money
As a seller or buyer, you cannot let the excitement of making a sale on your commercial property blind your instincts and logic. There are a range of things that can go awry during a real estate transaction. With a trusted and experienced real estate attorney on your side, you can resolve these problems quickly and move on with your sale or move on to find the next one.