Buying and selling commercial properties and real estatetowards investment is a lot more complex than that of a home. It involves a lot of money and liability issues for both parties. There are fewer protections in place for buyers here than compared to buying and selling a home. The law is neutral on how these transactions are carried out – the basic premise is that both parties are savvy enough to understand terms of the contract. Parties have to do due diligence before drafting a sales agreement to ensure that there is no fraud or illegal acts. It is always a good idea to hire a seasoned professional in closing such deals.
How the process works:– How to do them effectively?
Even though the basics are the same, some aspects of dealing in Commercial Real Estate vary quite a bit from residential real estate.
- Valuation of property: A large chunk of time and effort is spent on determining the value of commercial properties. Since real estate is considered a unique product, there are few ways to make comparisons. Commercial properties and real estate could include warehouses, office buildings, retail spaces, factories, parking spaces and even movie theatres. What sets it apart from residential real estate is the fact that income can be earned from renting, leasing etc. of such properties. This adds to the overall value and since income streams have to be considered, a professional can help in setting a price for the property in question.
- Negotiation and doing checks:Commercial properties and real estate transactions are very intensely negotiated. Property buyers don’t have recourse to consumer protection laws at all if the deal is skewed. Hence, it is important to do all the check before making a decision and signing a contract. During the negotiation phase, the buyer has enough room to look at factors that would impact property values and ask from concessions from a seller to counter problems. This will decide whether the property will make or lose money and impact your bottom line as a buyer.
- Liability: One more aspect which is real important in commercial properties and real estate transactions is the potential for transfer of legal liabilities to new owners. If any laws are violated, then the new owners are subject to state and federal regulations. For example, if the property is on a site deemed to be environmentally hazardous, the newest owner has to get it cleaned up. This is even though they had nothing to do with it. These costs can be phenomenal, making it important to check history thoroughly to avoid taking on costly liabilities.
- Liquidity crunch:Commercial properties and real estateinvestments is pretty expensive and ties up a big chunk of a buyer’s liquid assets.
How professionals can help:
There are quite a few benefits to hiring a professional to assist in the purchase of properties. They are very familiar with the parties who do background checks, insurance companies and banks as well. So, seek their advice today!