Becoming a property owner in Michigan is exciting no matter the type of property or your ownership goals. However, it’s important to perform due diligence before you sign a contract, especially if you’re investing in commercial real estate.
What is due diligence?
Few people will buy a property sight unseen. You want to investigate it first to ensure that the title is clear and that the seller is the actual legal owner. It’s also important to have commercial property inspected to uncover any hidden defects or code violations that could affect the sale.
In fact, commercial real estate law requires these things before selling property. However, Michigan’s consumer protection laws do not apply to commercial real estate.
That’s why due diligence is essential.
You’ll want to know everything you can about the property, the seller, and local or state codes. If there are tenants in place, who are they and how will an existing rental agreement impact you as the new owner? You should also have financing lined up so you can negotiate from a position of strength.
Steps before signing any commercial real estate contract
Because commercial real estate sales have so many moving parts and extra requirements, it helps to have a pre-closing checklist handy so you can keep everything straight.
Although every transaction and situation is unique, these general guidelines should help create a smooth property transfer.
- Have all of your paperwork in order. This includes everything from appraisals to zoning laws and environmental impact statements.
- Validate paperwork and legal documents. You’ll want to make sure that the title is clear with no liens attached, that signatures and financial information are accurately documented and valid, and that you fully understand the legal and financial implications of your purchase.
- Conduct inspections. You need to know of any problems that the seller needs to address or that could affect the property’s value. You’ll also want to have engineers or any other specialists conduct a study to ensure that the space is suitable for your intended purposes.
Once all of the preliminaries are taken care of and you’re fully informed, you can negotiate a price based on the fair market value of the property.
Having everything in order before you sit at the closing table will help ensure a smooth process and faster access to your new property. It will also help you avoid buyer’s remorse and make sure you’re getting what you expect from the deal.