Errors when selling commercial properties

On Behalf of | Jul 3, 2018 | Commercial Real Estate |

There are many errors that can be committed by all of the parties involved in the sale of a commercial property. Commercial real estate owners in California should take care to avoid certain mistakes when selling their commercial properties.

One mistake to avoid is not informing the potential buyer of tenant defaults. Buyers should be advised of tenants who have delinquent rents or if a security deposit had to be applied to a missed rent. Not being upfront about such matters can compromise deals.

Another common seller mistake is the improper management of financial records, particularly tax returns, which are used by lenders to verify the cash flow of a property. Sellers should refrain from adding on unnecessary expenses in order to reduce or zero-out their taxable income. For the expenses that are included on the return, they should be properly classified.

Some lenders tend to not view month-to-month leases favorably when wanting to see proof of a contract-based stream of income that is more than billed mortgage payments. Other lenders may not recognize such income and could be disinclined to offer a loan to the buyer, preventing the sale from occurring.

Overpricing a commercial property is another error that could jeopardize the chance of a timely sale. The key to pricing the property is to do so without alienating the buyers. The goal is to have buyers make contact to ask questions about the property and to ask for additional information. However, buyers will not be inclined to get in touch if the price is too high.

An attorney who practices business and commercial law may assist a client with the legal aspects of buying or selling commercial real estate. Legal counsel could negotiate terms for purchase agreements, oversee valuations and engage in litigation to address commercial transaction disputes.

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