Cities Title can handle any type of closing. Whether you’re closing on a home or a commercial building, we’re here to help. Many people assume that the closing process for residential and commercial properties is fairly similar. However, that isn’t actually the case. There are more regulations when it comes to commercial closings, and the process is far more involved. You can learn more about the differences — and the similarities — between these types of closing below.
1. The Intended Use of the Property
The purchase of a residential property purchase is to provide housing for an individual or family.
Commercial buildings, however, are focused on business. Examples of commercial buildings include offices, retail buildings, and hotels.
2. The Closing Progress
Closing on residential properties is handled according to a fixed system.
Closing on commercial properties, however, can be far more complex. There are many different parties involved in the process, such as sellers, buyers, lawyers, assigned signers, and corporate or board members.
3. Regulation for Closings
Residential closings need to comply with the Real Estate Settlement Procedures Act (RESPA), which is the law that regulates residential home purchases at the federal level.
RESPA does not apply to commercial closings. However, both sellers and buyers need to show due diligence during this process. Zoning requirements need to be followed. Properties must be assessed to determine seismic risk. It’s necessary to conduct both assessments of the condition of the property and the environmental site. It is also necessary to obtain American Land Title Association (ALTA) endorsements. A lawyer will need to be involved in the process as well so that a contract can be drawn up.
4. The Parties That Are a Part of the Process
In residential sales, there are four parties involved. There is the seller, the buyer, the lender, and the title or escrow company.
There are more parties involved in commercial closing. This includes the seller, the seller’s lawyer, the buyer, the buyer’s lawyer, the lender, the title or escrow company, assigned signors, board members, and corporate officers.
5. The Sales Contract
Sales contracts for residential sales are standardized.
With commercial closing, these contracts are customized to meet the needs of all parties involved. A purchase and sales agreement (PSA) will be drawn up. It will include various parties and could involve an LLC or LLP.
6. The Final Process
The last steps for closing on residential homes is to have the property inspected and appraised.
Commercial closings, however, have more steps. It is necessary to conduct a survey of the property, complete zoning reports, research ALTA coverages, conduct environmental and zoning reports, complete uniform commercial code (UCC) filings, assume leases, and more. In some cases, additional steps may need to be taken before closing can be completed.
7. Clearing the Property to Close
Once the steps above have been completed, it’s possible to close on residential or commercial properties.
Since more parties are involved in commercial closings, and because more steps must be completed, commercial closings tend to be much more complex. Do you need additional information about commercial closings? If you do, don’t hesitate to reach out to us! If you’re in Minnesota, then we would be glad to assist you with your title and help you complete the closing process.