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How commercial closings are different from residential ones

When it comes to real estate, the commercial closing process deviates in many ways from the residential one.

Although commercial buyers and sellers enter into escrow just like residential ones, in the case of the former, it tends to be a lot more regulated. This is the case because a significantly higher amount of money is often involved in commercial transactions.

It's during this stage that an escrow agent is appointed to ensure that the escrow funds are set aside in a separate account and that no money is released from it unless the seller or buyer put it in writing to do so.

Parties to a commercial closing often are often business entities looking to restrict their liability when they become involved in certain types of transactions. That's why, in the commercial closing process, it's important for the seller's signing authority to be verified early on.

The responsibility falls on the title agency to verify that the person who has placed the parcel up for sale is authorized to do so. A notarized statement from the company's ownership or board of directors can prove this and so can a corporate charter. This is a requirement that must be met before any distributions from escrow can be made.

Commercial real estate sales and purchases are not subject to the Real Estate Settlement Procedures Act (RESPA) as is the case with residential transactions. As such, buyers in commercial transactions wrangle with sellers to have it written where they can pull out of the contract closing date or have modifications to the property made afterwards. The seller, in contrast, is always looking to shorten that time frame a bit.

The final step in the commercial closing process involves both parties reviewing the title to the property for errors and filing it with the Secretary of State. Critical aspects of this document that both buyers and sellers should make note of are zoning restrictions, that limit their abilities to make modifications to the property, as well as liens against it.

The commercial real estate process lacks some of the federal protections afforded to residential buyers and sellers. You may find it wise to consult a competent Melbourne commercial real estate attorney to ensure that your interests are fully protected in the commercial closing process.

Source: Property Metrics, "Definitive guide to the commercial real estate closing process," J. McBride, accessed Sep. 20, 2017

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