As commercial real estate deal flow has significantly decreased due to the novel coronavirus/COVID-19, there is no better time than the present for sellers of commercial real estate to plan in advance for the successful sale of their property.
In real estate transactions, the timely exchange of property due diligence and title documentation is one of the most important, but overlooked, parts of the deal. Many real estate closings are delayed because an issue arises resulting from the buyer’s due diligence review of the subject property. The seller can anticipate and avoid many of these delays by anticipating potential issues, and assembling responsive documents and information that may be required by the buyer, or closing agent. Following is a list of items and information that sellers should consider putting together in a diligence package before listing the property for sale:
The diligent seller should also retain the services of a real estate lawyer who conducts commercial real estate closings. A lawyer can order a new title search before the property is listed for sale, as well as perform a review of the documents referenced above to assist the seller in negotiating the most favorable purchase contract under the circumstances. Since a title search will eventually need to be ordered, doing this sooner, rather than later, will reveal whether there are any liens or other matters recorded against the property that are unknown to the seller and which, if known, can be appropriately addressed in the purchase contract. These issues could include contractor liens, code enforcement liens, liens in favor of any associations or districts with authority over the property, wild deeds, easements, etc.
Identification and resolution of the foregoing matters before listing commercial property for sale will expedite the closing process, help the seller and their counsel structure a most favorable purchase contract, and result in fewer closing delays, particularly at a time when lenders are tightening their lending standards, commercial real estate valuations are in flux, and the pool of potential buyers may be shrinking.