High Level Roadmap for Commercial Real Estate Buyer
Purchasing a commercial property is complicated. However, the transaction itself generally follows the same workflow.
Hire a Real Estate BrokerA Commercial Real Estate Buyer typically would start by selecting a brokerage.
The buyer should research to see if the brokerage successfully completes commercial transactions in the location of the property. The buyer should also make sure the brokerage is licensed and in good standing with their state and locality. Before signing on with the brokerage, the buyer should outline the details of the scope of their relationship (e.g., exclusive or non-exclusive) and how long the buyer would like to utilize the brokerage.
Determine the Structure of the TransactionWhen the brokerage finds the right property and begins facilitating the transaction, it is critical to determine key deal points for the structure of the transaction (e.g., any and all loan considerations, whether to create a purchasing entity, and/or if the property is part of a 1031 like-kind exchange). After these high points are finalized, a term sheet can be prepared and offered to the seller. If the seller is agreeable, both parties can then engage in the due diligence process.
Conduct Due DiligenceFor a buyer, it is critical to visit and inspect the property in-person. Also, along with legal counsel, the buyer should also review all existing leases, management, service and other agreements tied to the property and understand what happens if the property changes hands. Buyer should also review zoning restrictions (both current and future), to ensure buyer’s intended use of the property complies.
Draft & Execute ContractLastly, after due diligence has been conducted, if the parties still are satisfied, then they would commence with drafting and executing a commercial real estate agreement.