We always hear the term “closing cost” thrown around in any real estate related conversation. So what is this pesky cost? Most importantly…. Who PAYS this pesky cost?
Simply put, closing costs are the fees required to complete any real estate transaction. Closing costs vary from residential real estate , commercial and all the way up to land sales. You have to pay these costs once (you) the buyer has received their money for the purchase and all required document’s relating to the closing have been signed. This typically happens on closing day.
The major difference between commercial and residential closing costs, is that in commercial deals the seller is responsible for the cost. Commercial closing costs fall in the following categories:
Appraisal: It is difficult to determine the value of a large commercial building. There are professionals in the industry that will come along and do this for you. This generally costs thousands.
Inspection: As is the case with any real estate purchase (commercial or residential) , there must be an inspection of the property. The inspection helps both buyer and seller. It determines that the condition of the property is habitable. It also lets the buyer know if there are any major defects or renovations that will need to take place. For example, a leaky roof is something that could be caught during an inspection. At this point, the owner must handle the leak so that the buyer will not be financially accountable in the future. This generally affects the pricing and negotiations process.
Property Repairs: Property repairs generally consist of things like electrical and mechanical problems in the buildings exterior and common areas. The inspection report will come in handy when deciding what to do here.
Other commercial closing costs will include:
- Commissions for the agent/ broker.
- Marketing expenses
- Outstanding property debt
- Title/ selling fees.