Closing on commercial real estate can be complex. It takes time, and there are many details to consider. The average commercial closing will take weeks, and it is not uncommon to take a few months. However, it is important to follow all the steps in a commercial closing.
What are the steps for closing on commercial property? We will tell you what you need to know in this two-part post.
A letter of intent (LOI) isn’t always necessary, but it can be a useful first step in many commercial transactions. It isn’t a contract to buy the property, but it tells the seller that you have a genuine interest in a purchase. With an LOI, the parties agree to sign a contract if both parties meet certain conditions. However, the enforceability of an LOI can vary depending on the circumstances.
What goes into an LOI? It depends on the agreement. The parties involved and property details are basic information for an LOI. You would also include the intended sale price and other financial terms. It can also include various conditions under which the parties can back out of the deal.
A title search is a necessity when buying any property. The title might look good, but there could be many legal issues. For example, you might find that more than one entity has a claim to the property. Buying the property without addressing this claim could lead to significant problems.
With a title search, you hire a lawyer or title company to investigate the title. They will search the public records to track the chain of ownership. A title search will also involve uncovering any liens that may be against the property. Once the search is complete, you will know the title is clean, and you can move forward with the closing.
Title insurance is another recommendation for closing on commercial property. This insurance protects the buyer if any issues arise after the title search. The insurance will protect your financial interest if any unknown liens, title defects, or rival property claims come up. It can even help cover some of the costs of litigation.
You might wonder why you need title insurance after having a title search performed. The first reason is that your lender might require it. Another is that even the best real estate attorneys can miss issues in a title search. Most buyers find it better to have the coverage rather than take the risk.
Now you know some of the basic steps of closing on commercial property. If you would like to learn more, you can click here for part two.
Contact Title Group of Tennessee for all your title service needs. We can help you through every step of a commercial closing in Tennessee.
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