Commercial Real Estate Purchase Checklist
Here is a detailed explanation of each bullet point:
Key Dates:
- Purchase and Sale Agreement Effective Date: This is the date when the legal agreement between the buyer and seller becomes effective.
- Escrow Period: This is the time period between the signing of the purchase agreement and the closing of the transaction. During this period, both parties must fulfill their obligations before the transaction can be completed.
- Estimated Close of Escrow Date: This is the target date for finalizing the transaction.
- Due Diligence/Buyer’s Investigation Period: This is the time period during which the buyer can research the property thoroughly. The buyer should use this time to investigate the property’s condition, zoning, environmental issues, and other relevant factors.
- Earnest Money Deposit Non-Refundable Date: This is the deadline by which the buyer must back out of the transaction without losing the deposit.
Essential Items:
- Fully Executed Purchase and Sale Agreement: This is the legal agreement between the buyer and seller. The buyer should review the terms carefully before signing.
- Disclosures: The seller must provide the buyer with agreed-upon information about the property, such as any known defects or issues.
- Preliminary Title Report: This report provides information about the property’s ownership and any potential encumbrances.
- Zoning: The buyer should confirm that the intended use of the property is permitted under local zoning laws.
- Natural Hazard Disclosure: This disclosure informs the buyer of any potential insurance implications due to natural hazards such as earthquakes, floods, or wildfires.
- Environmental Investigation: This investigation helps protect the buyer from potential liability by identifying any environmental issues associated with the property.
- Hazardous Material Survey: This survey identifies any hazardous materials on the property and helps the buyer budget for potential remediation.
- Building Physical Inspection: This inspection identifies any potential repairs or upgrades needed for the building.
- Survey: This verifies the lot lines, easements, and setbacks of the property.
- Wells/Septic: If present, these should be inspected as costly repairs are possible.
- Termite: This inspection identifies potential pest issues.
- Utilities: The buyer should understand the service providers and costs associated with the property.
- Appraisal: This determines the fair market value of the property for loan and negotiation purposes.
- FIRPTA Affidavit: This confirms the seller’s tax status.
- Bill of Sale: This documents the transfer of personal property.
- UCC Search: This uncovers any encumbrances on personal property.
- Insurance: The buyer should obtain the required property and liability coverage.
- Closing Statement: This provides a detailed breakdown of all transaction costs.
- Agreements Assigned/Terminated: The buyer should understand any existing service agreements.
- Tenant Estoppel Certificates: These verify the lease terms and tenant compliance.
Construction and Renovations (if applicable):
- Construction Budget: This determines the loan needs for design and construction.
- Architect & General Contractor: These lock in fixed prices for services.