1) Hire a Commercial Real Estate Agent
Commercial real estate transactions can often be lengthy, complicated, and unpredictable. Consequently, there are many benefits to hiring a commercial real estate agent who is familiar with the industry and the process of finalizing a deal. Because they possess crucial local market knowledge and practice valuable negotiating techniques, agents ensure that their clients’ best interests are kept at the forefront of each transaction. Real estate agents typically work on commission, meaning they receive an appropriate percentage of the final sale price of a property. As a buyer, however, you may be in luck because, customarily, the services of a buyer’s agent are ultimately free to the buyer, as the seller’s agent splits his or her commission with the buyer’s agent.
2) Determine Your Real Estate Needs
If you are thinking about purchasing a commercial property for your own business needs, you might have a vision of how that property will be used and how it will look once you are the new owner. On the other hand, you may be purchasing property as an investment and be openminded about the functionality and appearance of the building. Either way, it is critical that you work with your agent to outline your real estate needs. What is your budget? How much space do you need? Where would you like to be located? Are you looking for any special features? What type of zoning is appropriate? There are several questions that need to be answered in order to narrow down your search for the right property. Luckily, if you are unsure about what you need or have any questions, your agent will help you determine both what is necessary and—of equal importance—what is unnecessary.
3) Identify a Property That Works for You
Once you and your agent have determined your list of requirements, it is time to identify properties that fit your needs. As a commercial real estate professional, your agent may use their knowledge of the local market to begin suggesting properties. There are several online and print sources that advertise available listings that both you and your agent can access. For example, Loopnet.com—the most prominent online source for advertising commercial properties—can be viewed with or without an account. One of the most popular print advertisements is the Commercial and Investment Properties Magazine. Publications can be found outside of office buildings, restaurants, and at newsstands. Of course, you do not want to limit your search, so it is smart to explore a variety of sources, such as crexi.com, Business West, MassLive, and MLS. Additionally, many brokerage companies will post their listings on their own websites. At Low & Picard, we encourage potential buyers to subscribe to our emailing list in order to stay up-to-date on our latest listings. Ultimately, while you are encouraged to explore listings on your own, you can rest assured that your agent will actively and constantly scan the various outlets in order to find suitable properties for you. Agents are often the first to learn about new listings and are therefore able to present those to you early on, bettering your chances of getting an offer in early.
4) Set Up A Showing
After you and your agent have identified a property that suits your needs, the next step is visiting the property for a formal showing. If an agent from another company holds the listing, then your agent will contact him or her to set up a showing. Together, you, your agent, and (as needed) the seller’s agent will tour the property, giving you a chance to see for yourself if the space fits your vision.
5) Make an Offer
So, at the showing, you loved the property? That’s great! Now it is time to make an offer. Using their local market knowledge, your agent can advise you in this process by suggesting an appropriate price, a deposit amount, any necessary contingencies, or elaborating on other components of an offer. Making an offer on a commercial property can be complicated, however, so it is recommended that you have an attorney review the offer before it is submitted to the seller. It is important to note that several contingencies protecting the buyer’s deposit, such as building inspections, environmental inspections, financing approvals, and municipality approvals, are often built in to an offer.
6) Purchase & Sale Agreement
After you and the seller have agreed to the terms of an offer, the seller’s attorney will draft a purchase and sale agreement that elaborates on those terms. Specifically, the P&S agreement outlines the steps that will be taken during the due diligence period. This agreement is designed to protect both the buyer and the seller. While the seller’s attorney will draft the P&S, it is highly recommended that the buyer has his or her own attorney review the agreement prior to signing.
7) Due Diligence Period
Once you have signed the purchase and sale agreement, the due diligence period will begin. This can last anywhere from 30 to 180 days, depending on the terms agreed upon by you and the seller. Also known as a “free look opportunity,” the due diligence period allows the buyer to conduct full inspections of the property. If any unsatisfactory conditions are found, the terms of the P&S may allow the buyer to rescind the offer. The due diligence period also grants the buyer time to secure financing for the transaction. Your bank will often require various personal and business information, as well as environmental reports on the property or other relevant information.
8) Final Walk Through
When the due diligence period is complete and your bank has approved your financing, the attorneys will schedule a closing date. Before the closing, however, you will have a final walk through of the property. You and your agent can use this opportunity to ensure that the seller has removed all personal belongings not associated with the sale of the property.
You’re almost there! The closing is the last step before you are handed the keys to your new property. Typically, the buyer’s attorney will host the closing at his or her office. The seller’s attorney will often attend the closing and complete the paperwork with your attorney. You—the buyer—and the seller may opt to pre-sign the documents, meaning your presence at the closing is not necessary. Once the closing is finalized, you are able to switch the utilities into your name. Finally, the seller will deliver the keys and the property is officially yours!
We understand that the process of purchasing a commercial property can seem daunting, but we believe that by outlining each step, we can help boost your confidence as you navigate the commercial real estate market. Ultimately and most importantly, however, we hope to reassure you that the team at Low & Picard is here to support you throughout the process of buying a commercial property. When you’re ready, give us a call and we’ll get started!