Buying Business Real Estate
Buying Business Real Estate
When contemplating the purchase of real estate for your business, there are many factors to consider, as there are significant differences between buying commercial and residential real estate. There are also important documents that you will need to focus on and understand. Let’s start by discussing some of the differences, so that you can better understand how buying commercial real estate differs from other real estate transactions.
There are several significant differences between buying commercial real estate and buying a home to live in, including:
- Lending – Typically, lending is based on your credit when buying a single-family home. However, for commercial real estate the lending process is based on your business’ balance sheet, which means that the lender will consider the property’s value in making lending decisions. If your business is new, the lender may also require you to personally guarantee the loan, which means that your personal assets would be available for repayment of the loan if your business was unable to make payment.
- Value – While home values often rely on comparable properties in the market, commercial property value also considers the income that the property has generated.
Understanding these differences and how they may alter this process is one step toward being well-educated before you build your business venture. However, you will also need to consider the legal documents involved in the process of buying any building. Specifically, you’ll need to acquaint yourself with the Agreement of Sale and the Deed.
The Agreement of Sale outlines all of the terms and conditions of the transaction, from both the buyer and seller’s perspective. It usually sets forth obligations that both parties must comply with and key dates in the process and includes details such as the price and the date of payment, both of which are crucial for both parties to understand. Additionally, it may identify the circumstances under which the Agreement can be terminated and describes how such termination may affect the parties. Since this is a binding contract once signed, it is important for both parties to know and understand the circumstances that would permit a party to rescind the sale and the ramifications of such a rescission. A careful review of the Agreement of Sale is one of the points where the better the deal can be understood, the smoother the process may go. Understanding your Agreement of Sale can help you to avoid potential hurdles when buying.
The Deed is the official document that transfers the property and is typically prepared to be signed at the date of payment, which was previously decided upon. The signing and recording of this document is when the transfer of the property occurs, and the purchase is complete.
For help ensuring that this process goes by smoothly, with your best interests in mind, a business attorney can be a wonderful resource and ally. I am here to help you with your business law needs: explaining the process, reviewing the details on your behalf, writing up any necessary agreements, and providing you with legal support to tackle any potential hurdles. Let’s discuss how your business is growing and how I can best assist you in these goals.
The information presented here is for general educational purposes only. It does not constitute legal advice and does not create an attorney-client relationship.