Simple Steps on Closing CRE Escrow Fast
- Mar 20, 2013
In today’s fast paced commercial real estate market, investors of commercial real estate should be prepared to move quickly should a good opportunity present itself.
One of the biggest questions any seller will have is “can you afford my property?” I believe it is extremely prudent and productive for a serious buyer to get pre-qualified by a lending institution. There is some up-front work that is required, but in the long run it will save time and allow a buyer to jump on excellent opportunities.
In order to open and then close a commercial real estate escrow, a simple, yet effective piece of advice is to know what your investment parameters are. You can waste a lot of time pursuing many different types of product and then in the end, not pull the trigger on any of them. If single tenant net industrial product is your cup of tea, pursue that product. If it’s apartments or office buildings, pursue those and become an expert on that specific product. As an expert, you will know when you have come across an excellent investment opportunity.
Always remember that if it is a deal, it probably will not last long. One must be ready to make fast decisions in a timely manner. There is a saying that says time kills all deals. That’s another reason for having your financing all lined up, or find sellers that are willing to carry paper.
It is always important to have an environmental report done in order to assure the new buyer that they are not buying someone else’s problem. While most often the lending institution will require their own inspection company, it does make sense for a buyer to have relationships with various environmental consultants. If environmental problems do raise their ugly head, it may make more sense for the seller to remediate any problem and then sell it.
After a property has been identified and an initial offer presented, it makes sense to have a preliminary title report done in order to uncover any hidden skeletons that could slow down the transaction. Are there any recorded leans that the seller is not aware of? These items can delay an escrow unnecessarily.
I find that sellers who have taken the time to complete a property information sheet prior to going to market will save an enormous amount of time for both the buyer and the seller. If full disclosure is done up front, transactions can close expeditiously and all parties will know the true state of the property.
Should there be multiple tenants within the property, it is advisable to request the estoppel certificates and leases up front so due diligence can be done expeditiously. If there are any open items that need to be addressed, the estoppel certificates should help uncover those areas.
The purchase and sale contract is another important item to consider. If the buyer is able to use their own contract, it should address areas that are of importance to the buyer. One needs to be aware that many sellers prefer more of a standard contract that is considered fair to both the buyer and the seller.
With the commercial real estate market heating up due to the availability of capital and low interest rates, it makes sense to be prepared for the right opportunity when it comes along.