Commercial Real Estate Buyer’s Checklist- Closing the Deal
Commercial Real Estate Transactions can be difficult to navigate. This is the sixth and final article in the series covering the Commercial Real Estate Buyer’s Checklist aimed at simplifying your next commercial real estate purchase.
If you are a seasoned commercial real estate buyer or broker reading this article, feel free to skip the below links to the previous five articles in this series. If you are new to commercial real estate acquisitions or would like a refresher course, I highly recommend going back and reading the previous articles so that you can better understand the different stages of the transaction.
See the below links to the first four weeks of this series:
Commercial Real Estate Buyer’s Checklist Item #17 – Closing the Deal-
We discussed “making the offer” in week one. In week two’s article, we discussed how your commercial real estate broker should be the “quarterback” of the due diligence team (team you need to assemble to fully research the property once you have an accepted contract). We also learned in week three’s article that the commercial real estate broker should be the head coach of your site acquisition team (we also covered topics specific to commercial investment property acquisitions). In week four we provided a checklist specific to commercial land acquisitions. Last week week we provided a checklist that might be helpful for your next single user development. This week we finish up the series covering Closing the Deal!
Below is a list of topics that I recommend reviewing to better prepare you to Close The Deal:
#1 Making the offer – I am sure that you have heard the old real estate saying (not location, location, location) that you make (or lose) money when you buy. The terms that you spell out in your purchase offer (not just price) will make a major impact on whether you will have a successful closing. Please make sure to employ seasoned commercial real estate brokers and commercial real estate attorneys to represent you in making your offer.
#2 Due Diligence Period – My opinion is that the due diligence period (time period after you go under contract prior to when your earnest money goes “hard”) is where the best commercial real estate teams show their true value. As you read in week two of this series, the work that this team completes once you are under contract to purchase a property is critical to a successful transaction.
#3 Site Acquisition Research – As I have said throughout this series, the due diligence period is not the time to decide “IF” you want to make an offer…it is meant to confirm your decision. The Site Acquisition Research period is the time that you decide if the property is the right fit for you. There are countless different commercial real estate product types…which all have their own specific variables to consider. Week three’s article discussed “some” of the topics you may want to consider for investment property acquisitions and week four covered “some” of the topics that you may want to consider for commercial land acquisitions. The key before you tour properties through the web or the windshield is to spend time in a planning meeting to determine goals so that your commercial real estate broker can take a rifle approach in locating your desired property. Once you narrow your search down to several properties, the commercial real estate broker will be valuable in helping you to analyze potential sites.
#4 Development or Redevelopment – If you are purchasing a property for development or redevelopment (now or in the future), you have additional homework to complete in the site acquisition and due diligence period that you normally might not have to consider when you are purchasing an asset that requires no development or construction work. There are a variety of topics that you should consider depending on your type of development. We covered some of these topics in last week’s article on single user development. Each development project has different variables, so my recommendation is to surround yourself with a commercial real estate team that is experienced in creating accurate proforma’s regarding expected total project costs. Once a proforma is created, it will be important to compare the total project costs (leave margin for error) to the goals you established during your site acquisition research.
#5 Game Time – If you followed the suggestions that we covered in the last five weeks of this series, you have given yourself a great chance for a successful closing. Even if everything goes as planned (rarely does in a commercial transaction, so I recommend employing a commercial real estate team that excels in problem solving) there are usually a variety of “issues” that come up within a few days of closing that were unexpected. If you spelled out terms successfully in the purchase agreement and any amendments you created along the way, hopefully the “issues” that come up within a few days of closing will be limited. Most of the issues that I typically see relate to money (which party is going to pay for this unexpected “expense” that just came up), but some relate to additional due diligence items that lenders need (many lenders have more money to lend than in the past, but they are typically much more diligent before they “hand” it out) that were not previously covered. Employing a commercial real estate broker skilled in the art of communication will never be more valuable than when you are close to “game time” (the closing table). My general recommendation (impossible to know what “issues” might come up before closing) is to stay firm regarding unknown issues, but to remain “big enough…to be small enough…to make the deal.” One of my commercial real estate mentors taught me this concept several years back. I feel that it is a universal statement to both commercial real estate deals and life.
Next Steps—-I hope that you have enjoyed reading this series as much as I have enjoyed writing it. I also hope that the information that we shared can proove valuable in your next site acquisition. Please understand that every commercial real estate transaction is different so it is important that you hire a seasoned commercial real estate broker to help you navigate through the transaction. Although the commercial real estate topics mentioned above are common to many commercial real estate transactions, I am regularly involved in deals that require completely different criteria. I look forward to following up with you next week to discuss….The Commercial Real Estate Seller’s Checklist…with hopes of helping you to better prepare to sell your property.
Stay tuned for Next Week’s Article….Covering The Commercial Real Estate Seller’s Checklist
See below for helpful Commercial Real Estate links:
Contact a Commercial Real Estate Expert today:
Luke LeGrand, ePRO 210-843-5853