The most frequently asked questions of a buyer on a commercial real estate transaction.
Very similar to a seller, the requirements for a buyer will vary on each transaction. Here are the top questions I commonly ask of a buyer to close a commercial escrow:
1. Entity Documentation. Most often, a buyer of commercial real estate will want to hold title under an entity. The most commonly used entity type is a limited liability company. However, we also see corporations, partnerships, and trusts. The title insurance company would like to review the appropriate authority documents for the entity type. These include, but are not limited to, bylaws, resolutions, operating and partnership agreements, and trust agreements. We will review the documents to confirm who is authorized to sign on behalf of the entity and if the buyer is obtaining a loan, if the entity has the power to encumber real property. Sometimes, we will ask for more documents once our initial review is complete. We will also need to confirm the entity is property formed and in current valid status in the domicile state. This includes requesting articles of organization or incorporation and a certificate of good standing.
2. Financing. We will need to know if the buyer is paying cash or obtaining financing. We will coordinate with the new lender on policy requirements, settlement statement and signing loan documents.
3. Exchange. Just like a seller side, we will inquire if buyer is effecting a 1031 tax deferred exchange. We will confirm with the exchange accommodator that we are complying with the exchange instructions to property meet the IRS requirements.
4. Logistics for Signing. In some cases, we will need to arrange for a buyer to sign with a company-approved notary. We will ask if the buyer is local and can come into our office to sign or if we should coordinate with our notary service for mobile signing appointment.
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