Your offer was accepted by the seller of a particular piece of commercial property. Don’t get too excited quite yet! There are still a few steps to take to ensure the closing process goes as smooth as possible. In addition to signing those closing documents, you need to ensure your sale is legal, final and possesses a lawyer’s seal of approval. The closing process requires quite a bit more attention on your part before you can officially call the property yours.
The first step after an offer is accepted is to create an escrow agreement with the seller. Similar to the residential closing process, escrow is required to ensure both parties are serious and trustworthy with regards to the sale. In escrow, a neutral third party holds the closing funds in a separate account inaccessible to both the seller and buyer. These funds will remain in the account until all the criteria in the agreement have been met or one party exits the deal through the process outlined in the agreement. The criteria to be met are agreed upon by both buyer and seller.
Commercial real estate transactions, in particular, are typically more strictly monitored by the escrow agent, buyer and seller during escrow. There are far fewer regulations to prevent either party from harming the reputation or financial security of the other, so each must extensively protect their own investments. Title agents are typically the neutral third party who will serve as escrow agent between the buyer and seller.
Titles and Closing Documents
Each party participating in a sale must do their best to protect themselves from being burned. This process is called due diligence and includes the collection of relevant documentation that states the commercial property is both insured and in compliance with local ordinances.
Both buyer and seller should review the contract of sale with their lawyers to ensure every detail has been properly executed and there are no outstanding legal or ownership disputes related to the property.
Finally, each buyer should request proof of a title insurance policy to make sure they are not saddled with unexpected liens or defects on the title. All due diligence should be reviewed with a lawyer and the title agent.
Accepting and Signing Documents
Once all the documents are in order and all due diligence has been performed, the documents are ready for signature and notarization. In addition to the title and insurance policy, any leasing documents should be transferred to the buyer to ensure they both benefit from their lease and are held accountable for any breach of contract in the future. As always, a title agent and lawyer should review all documents before signing to ensure nothing is wrong or has been missed.
Close with Confidence
Commercial real estate transactions can be confusing to navigate, and this is an area where hiring an experienced title company can really pay off. For a title agent that will help you through the complexities of the closing process, look no further than Eastern Title and Settlement. To learn how our experienced title agents can assist in your closing, contact us online or call 240-403-1285.