BUILDING PURCHASING GUIDELINES
LOCATION………….LOCATION………LOCATION
Not only is it important for your business, staff and clients but when it comes time for you to sell it will be a factor you need to consider.
Remember : Have an exit strategy going into your purchase, and it won’t be a nightmare when its time to SELL.
Ensure that your contract to purchase includes the following:
1) Correct Price and terms of payment
2) Correct legal description
3) Amount of Earnest Money and who gets the interest?
4) When the Earnest Money become non-refundable? What happens to the Earnest Money if the seller cannot close?
5) Always place the E.M. with the escrow company
6) Who orders and pays for the preliminary title, how much time do you have to respond to exceptions? If seller cannot cure, what happens?
7) Due diligence period, give yourself enough time to inspect the property. If you find a problem, does the Owner have a change to make the necessary repair(s)?
The three most costly parts of a building:
Structural
Mechanical
Roof
Seller should supply you with all information on the property in his possession such as;
Leases
Contracts
Old/ Current appraisals and environmental surveys
As built surveys
Tax Records
Income and expenses information for at least two years
Personnel property that goes with the real estate
Financing
Financing, how much time do you need? This part of the transaction is what usually requires an extension at closing. It is very important to “encourage your bank” to keep your file at the top of the pile.
Visit with more than one bank and submit your information. Banks have been known to change the financing terms from your first application until the time you close. This will give you some leverage.
The bank will require, by an independent third party of their choosing, a Phase I Environmental Survey and an Appraisal.
Closings Costs
Who pays what at closing? Typical closing cost allocations are as follows:
1) Taxes and rents are prorated as of the closing date;
2) Security deposits are credited to the buyer or deducted from the purchase price
3) Seller pays for title insurance, brokerage fees, government transfer fees.
4) Usually Buyer and Seller split; escrow and closing fees, documentation fees, recording fees.
Things to Consider
Always have the property surveyed prior to the end of the due diligence period and have the lot corners staked. Walk the property.
Ensure you have language in your agreement concerning liquidated damages if you don’t close. Is the earnest money the only damages or can you be taken to court or binding arbitration?
Ensure that once you are under contract the Seller cannot enter into any leases without your permission.
What if the property is destroyed by fire or other causes?
It is best to have an attorney review or draft up your purchase agreement, also seek advice from your accountant when you buy and sell.
|