Purchasing commercial real estate can be tricky, but having a checklist beforehand can be really helpful, so that you don’t forget anything. There are some documents that are not necessary, but are still beneficial to the buyer and the seller. Carry a checklist with you beforehand to ensure that everything is put together properly and is in order.
Due Diligence Checklist For Commercial Property Closing Checklist for a Real Estate Agent
Precontract
Precontracts are a smart choice for both residential and commercial real estate. A precontract is simply a description of a contractual agreement that is not yet in place. In a way, a precontract is like a plan of action, as well as a promise for an agreement before the agreement has actually been implemented. A precontract ensures that the buyer (or investor) has everything on track and that they will see a return on their investment. The precontract outlines the promise of the agreement before the agreement has actually taken place. This is especially beneficial to someone who is putting down earnest money or who is promising verbally to go through with a purchase, but has not actually filed out the paperwork. For example, a seller may have three interested buyers, but may decide on one individual because she is paying a higher price than the other two. The precontract is put into place to say that the buyer is promising to make the purchase within a certain amount of time for a certain amount of money. That way, the seller has some assurance that the deal will go through.
Prepared Affidavit and Memorandum Agreement
The Affidavit and Memorandum Agreement is usually a simple statement that the involved parties have entered a written agreement over the property. It can be a blank form that is filled in by hand. The form is an extra step, but it is helpful in case the actual agreement or document is lost. It can also be used to outline all of the paperwork that was filled out and agreed upon by all parties. The Affidavit and Memorandum Agreement usually lists the state and county that the agreement will take place in and discusses the commercial purchase and sale of the property andor related business or supplies. The agreement is a short agreement and is signed and dated by all parties. An affidavit should be signed by a notary, which means all involved parties and the witness should meet at the notary’s office, bringing their identification cards. There may be a small fee for getting the document notarized.
Prepared Earnest Money Escrow Agreement
If earnest money is being put down, an agreement should be drawn up beforehand. Earnest money is an agreed-upon amount of money that the buyer will give to the seller (usually put into an escrow account until the sale is completed). If the agreement is not concluded satisfactorily, the seller usually has the right to keep the earnest money. The best way to describe earnest money is that it is a good faith deposit. An Earnest Money Escrow Agreement outlines how much earnest money is being put down, why and how the money is to be used.
Commercial Real EstateBusiness Agreement
Finally, put the entire agreement in writing in a formal purchase agreement. This is the final agreement (on paper) that the buyer and seller enter into and which will seal the deal and make the purchase final. After this paperwork has been completed and payment has been made in full, the buyer can take over the business property and the seller has completed the sale. If making a commercial real estate purchase which includes some type of business or materials, make sure that the purchase agreement lists all assets that are part of the sale. That way, you will not find yourself in the position of expecting to buy, for example, a complete motorcycle repair shop with all current business contacts, equipment and stock and end up owning only an empty building. The business agreement will vary according to what the buyer and seller agree on, but should be looked over by a real estate lawyer or experienced broker.
source: Beth Lytle
