Purchasing commercial real estate is a major investment. Whether the buyer is an investor looking for a future revenue stream or a business leader looking for company facilities, they may pay a premium price.
In many cases, buyers must come to the table with a certain amount of liquid capital on hand as earnest money. While many people associate contingencies specifically with residential real estate transactions, appropriate contingencies are also critical for those seeking to purchase commercial real estate.
How do contingencies help?
Those who make offers to purchase real property generally need to follow through on those offers. The seller could be at risk of financial setbacks if they cancel the closing without a contractually permissible reason, and they could retain earnest money to offset those losses.
Contingencies essentially create scenarios in which buyers can walk away from a transaction without facing financial claims from the seller. The contingencies used in a commercial transaction are often similar to those negotiated in residential transactions.
Buyers may add financing contingencies, which allow them to cancel the closing if they cannot finalize a loan. They may use appraisal, inspection or survey contingencies to address issues with the property that come to light after they make the offer. In some cases, there may even be a zoning contingency if the buyer must change the zoning for the parcel or secure a zoning variance to operate a specific type of business at the property.
Buyers and the agents representing them may want to work with a real estate lawyer to draft custom documents or to thoroughly review any purchase agreement paperwork provided by a seller. Integrating reasonable contingencies can take some of the risk out of a commercial real estate transaction.