Purchasing commercial property is a big decision. People buy for two primary reasons: in order to inhabit the building as a commercial entity or for investment purposes. Whatever the reasons, it is important to ask yourself, your realtor and your real estate attorney these significant questions about the property:
- Do you have an accurate square footage of the building, including outbuildings, storage areas and parking structures?
- What will be included in the building as it is sold? Which fixtures are staying including lighting, shelving, plumbing or even made-to order furniture? How much will it cost to replace components that the seller is not leaving behind?
- How would your characterize the condition of the property? An expert appraisal will help you evaluate the buildings. You should be warned, however, that appraisers often work in concert with agents. It behooves everybody who benefits from a deal going forward if the property “appraises out” at the sale price at minimum.
- What defects are present in the building and must they be “cured” prior to the sale? What will the cost of these repairs be? An independent inspector should be paid for by the buyer and should thoroughly examine all aspects of electricity, plumbing, structure, mechanical and roofing, as well as check for the presence of pests.
- What is the condition of the neighborhood, including other commercial properties? Does the area feel vacant or thriving? Are the neighbors’ businesses going concerns or do they appear to be dilapidated?
- What are the crime statistics for the area? It may be worth your time to consult with local law enforcement officials about the general vicinity and the specifics of your location.
- Are there any zoning or rebuilding restrictions which would impede your plans for the building?
- Is the building already ADA compliant or will significant alterations be required if any modifications are made to the building? Or is the property exempt for some reason?
- Is there adequate, safe parking for you to run a commercial enterprise in the site? What about for potential renters?
- Will your business be producing any waste products that need special disposal? How will you accomplish that at this site?
- What is the condition of the major roads leading to the property? Are they appropriate for the type of shipping vehicles that will be arriving daily and weekly?
- Are there any legal impediments to purchasing or modifying the building such as encroachments, title issues or liens?
- What are the estimated taxes for the building? How much variability has there been in property taxes in this jurisdiction? Are the current owners up to date in their property taxes?
- What are the estimated costs for insuring the building, both for damage and for liability? How do these rates compare to other areas in the same metropolitan area?
Purchasing commercial real estate is complex. Arm yourself with questions, note the answers and consult with a trusted real estate attorney prior to entering into negotiation and certainly before making any hasty decisions.