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Due Diligence & Escrow


This is where it gets a little more real. Money is about to change hands. You'll need to dot all the i's and cross all the t's. You can never know too much about the property you'll buy.

You'll generally need to get an ALTA(American Land Title Association) survey ordered, which can be used as part of the due diligence. An ALTA survey provides valuable information such as boundary lines, location of the main building (if there is one) including improvements, location of secondary buildings, the identification of easements (which are access rights by different service companies such as water, gas, telephone, railways and other utilities).

You and the seller will need to find an escrow officer who will be the neutral 3rd party overseeing the transaction. They will help with the transfer of deeds and funds. They make sure both parties are protected in the transaction.

The final closing escrow documents will include things like a quitclaim deed, non-foreign affidavit, title affidavit, bill of sale, sale and assignment of contracts, warranties and supplier guarantees.

Finally, you (the buyer) are given a due diligence time period with which to make sure all the documentation about the property is correct. This is where you triple check that everything the seller told you about the property is true. This includes things like service/utility contracts, surveys, environments reports, rent rolls, covenants, restrictions, and many other aspects of the property.

If something strange or wrong comes up in your inspection of the property, you have the right to tell escrow to cancel the transfer of funds.

Property Metrics has an excellent checklist for the final processes involved in purchasing commercial real estate.

Buying commercial real estate can be quite a process but if you follow these steps, it should make it all work smoother. Good luck.

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