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T O B U Y I N G C O M M E R C I A L REAL E S T A TES M A L L B U S I N E S S O W N E R ’ S G U I D E
e Purchase & Sales Agreement/P&S is a contract
between the buyer and seller for the sale of real estate, and
spells out very specific terms and conditions. It is developed
by the seller’s attorney or real estate broker.
Sometimes, before the P&S is signed, the buyer will make an
Offer, which is draed by his or her attorney. is Offer is
not required but, if both parties sign it, it may be used instead
of the P&S, or the P&S may be based upon the Offer.
Whether there is a P&S or a written Offer in place, the
seller usually responds to the buyer’s offer with adjustments
and this is called the Counter Offer. A negotiation period
is common before both parties agree on every detail.
Time Is As Important As Money
e seller usually grants a 60 to 90 day period from the
signing of the P&S to the Closing. is gives the buyer time
to prepare documents, complete inspections and provide for
transfers. It’s preferable to ask for a 90 to 120 day period,
since it may take time to get the appraisal and environmental
assessment completed. e P&S should allow for an
extension, to accommodate any delays or problems.
Transparency Is a Must
A “real estate disclosure statement” is a declaration by the
seller of everything known about the property. It does not
eliminate the need for inspections, nor does it act as a
warranty. Buyers need to ask about any defects, problems or
issues, preferably before the appraisal and environmental
inspection are done. Due Diligence involves investigating the
property before signing contracts and includes a recent
survey, environmental study, title search, physical inspection,
zoning permit/review, and operating cost analysis. Any and
all problems must be addressed and corrected by the seller
before the lender will approve financing.
Get a Safety Net in Place
Protect yourself bymaking sure there isa financingcontingency
in place. is states that if the buyer is unable to finance the
real estate, the seller must return the deposit – deducting
any out-of-pocket expenses that were incurred – and the
P&S becomes null and void.
Agreeing on the
Purchase & Sales
The Closing Is
Just The Beginning
e end of the process is the Closing, which the lender will
schedule. e buyer/borrower, any guarantors, the seller,
the lending officer and the lender’s attorney will attend the
Closing. All legal documents necessary for the Closing will
be required, including personal guarantees, the mortgage
and note, the loan agreement (as outlined in the
commitment letter), the appraisal and the environmental
study. When these documents are finalized, they should be
carefully reviewed by your attorney before you sign them for
the Closing. At the Closing (which your attorney does not
need to attend), there will be numerous documents for both
the seller and buyer to sign, but the real estate will not
officially transfer to you until the lender’s attorney records to
deed and files the mortgage and/or liens with the
appropriate state and local government agencies. Only aer
the lender is officially notified that this has taken place –
putting the lender in the appropriate legal position – does
the money transfer to the seller.
If your loan becomes past due, your lender’s attorneys
may draw up a forbearance agreement, which outlines what
the lender will do in order to clear the delinquency. e legal
fees for creating this are the buyer’s responsibility, plus a
lending fee of the outstanding loan principal which must be
paid at the time the agreement is signed.
Some of the liens that the lender’s attorney files include:
• A first mortgage on the property in question
• 1st Uniform Commercial Code (UCC) liens on
furniture, fixtures, equipment and machinery
• An equity mortgage, which secures a personal
guarantee, such as a second mortgage on the principal
buyer’s real estate
• Mortgages on other property, which may be owned
personally or by the company
• Other assets (like a Certificate of Deposit), which may
need to be offered as collateral