Mistakes to Avoid at a Commercial Real Estate Closing
December 15, 2020 Commercial Real State Closing
As is the case in so many ventures, information is king when investing in commercial real estate. If you want to avoid some common mistakes many investors make when buying commercial real estate, make sure you have all the right information.
Investing in commercial real estate is not for the faint of heart. It takes an ability to make dispassionate decisions on what properties to buy, what commercial activities best suit that property, and what kind of tenants you will seek once you purchase the property. All of those decisions have to be made before you close, not after. By then, it is too late. Instead, you need to gather copious amounts of information upon which to base your decisions.
Without information, an eye for detail, and a carefully prepared checklist for tasks that will be necessary for this particular investment, it is easy to fall into one of the many mistakes that await in the commercial real estate world. To help you avoid those traps, a good North Charleston real estate attorney can always help.
There Are a Number of Common Mistakes in Buying Commercial Real Estate
Proper gathering of information is at the heart of avoiding common commercial investment mistakes. Due diligence is important, but it isn’t the only common mistake. The list includes:
- Inadequate due diligence: This covers a lot of ground, from properly valuing the property you are planning to buy, checking for structural issues, and having a full run-down on zoning issues, title defects, site surveys, insurance policies, land-use restrictions, and title insurance.
- Not fully understanding your lender’s requirements: Have the information they might want about the property – and about you. Don’t get too invested in due diligence efforts without thoroughly understanding the lender’s information requirements, as well.
- Not checking on applicable building codes: Look at federal requirements, such as the Americans With Disabilities Act, as well as local and state requirements.
- Not checking existing tenant leases for problems: You probably can’t get rid of existing tenants – not immediately – but you need to know what their lease statuses are.
- Assuming the seller has revealed all existing problems and issues: Your due diligence should uncover much of this information. Your own inspections are vital, but you should submit specific questions in writing so that you have verifiable responses if problems arise.
- Assuming the closing statement will be error-free: Carefully examine every aspect of the closing statement for omissions, particularly of items such as buyer credits that redound to your benefit.
- Failing to research the area competition: You are not buying in a vacuum. You will have competitors in the area. Know who they are and, to the extent you can find out, how well they are doing.
These are some of the biggest common mistakes of commercial investors. Just remember that you don’t know what you don’t know. Too much information is never enough. Learn everything you can about your target property.
When Planning a Commercial Real Estate Transaction, Consult With Our North Charleston Real Estate Attorneys
There are a lot of legal aspects to a commercial real estate closing. If you are preparing to enter a commercial real estate deal in the North Charleston area, you should talk to the attorneys of Weeks & Irvine. We are well-versed in South Carolina real estate law and can help you successfully conclude your transaction. Contact us today.