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Buyers and sellers should be familiar with real estate closings

The commercial real estate closings process can seem daunting, however, knowledge of the process and the proper guidance throughout the process can help make it more manageable and successful. At times, caution and special diligence are required which is why it is important to be familiar with the complete process prior to embarking on a commercial real estate transaction.

The commercial real estate deal making process lends itself to creativity, however, it can provide fewer protections for buyers which is why it is important to have a firm understanding of the process while venturing through it. There are four primary steps involved in the commercial real estate process, including escrow, signing authority verification, due diligence and signing and processing title and closing documents.

During escrow, a neutral third party holds the funds for the transaction until the requirements of the agreement have been met or one party withdraws from the agreement according to the escrow terms. Escrow resolves trust concerns between the parties and ensures that money and property are exchanged when the parties agree that the terms of the agreement have been met. Negotiated escrow agreements are often common and certain provisions are also often common. The escrow process concerning commercial real estate transactions, and the paperwork associated with a commercial real estate transaction, can be especially complex.

Commercial real estate transactions are most commonly transactions between legal entities. Different legal entities have different levels of liability and may require additional due diligence steps. Overall, there are a number of important considerations for both the buyer and seller to be aware of and evaluate as part of the due diligence process. Commercial real estate transactions can also include additional paperwork related to a signing authority or authorities for the legal entities that are party to the transaction. There are a number of methods to provide and verify signing authority.

In addition, the title report and series of closing documents must also be accepted as part of the real estate closing process of a commercial real estate transaction. Titles in commercial real estate transactions can be complicated and contain important considerations for both the buyer and seller. There is commonly both a preliminary and final title report. There are a number of detailed steps that are part of the real estate closings process which is why it is worthwhile for both buyers and sellers to be educated about it.

Source: Property Metrics, "Definitive Guide to the Commercial Real Estate Closing Process," Aug. 14, 2015

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