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Commercial real estate underwriting can take some time

If you've recently set out to purchase commercial real estate in Florida, then you're probably well aware that while it's similar in some aspects to the residential process, it's very different in many ways as well. One factor that sets one type of transaction apart from the other is the time it takes to wrap up a deal. Commercial property closings notoriously take a long time.

The underwriting process is one of the reasons that commercial real estate transactions take so long to close. It's during that process that lenders perform a more in-depth risk assessment of the lender and, more specifically, the property that they're preparing to loan money for.

Underwriters tend to question whether the property and area that it's located in are projected to remain relevant. They try to identify what factors could affect that perception.

They also try to identify maintenance costs for the property and the capital that will be needed to make improvements in the future to enhance its value.

Another factor that underwriters take into account is whether the occupancy is expected to remain the same. They generally set out to extend funding only in situations in which the demand is higher than the supply. Underwriters also review market conditions to see what amount of rent their building owners can command in the area.

Underwriters also look ahead to when their borrower may ultimately decide to sell the property. They aim to make sure that there's a little value left on the table between what they've loaned and what the property could potentially sell for. This ensures that they have a sound exit strategy in case they need one.

The underwriting process is just one of many steps that can slow down the commercial real estate closing process. Due diligence assessments and verification of funding can also take some time, especially if they're not adequately handled from the start.

If you want to give yourself the best chance things being handled in a timely fashion, then you'll want to consult with an attorney who can guide you through the process.

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