Although residential and commercial real estate transactions are similar in certain respects, there are a number of differences between the two—particularly during the closing process. Therefore, one should not base his or her expectations regarding the former on previous experiences with the latter, and vice versa. Below are some of the differences between the residential and commercial real estate closing processes in Connecticut.
The Residential Closing Process
During a residential real estate closing, the purchaser provides all necessary documentation requested by the lender prior to receiving loan approval. Following approval, a title search is performed, and title insurance is purchased. As these steps take place, the down payment on the property is processed, and the real estate sale contract is reviewed and signed by the parties. After this has been completed, the deed or mortgage is transferred to the lender, the closing costs are paid, and the buyer becomes the new owner of the property.
The Commercial Closing Process
As noted above, the commercial closing process is different than the residential process in a number of ways. For one, the commercial closing process generally involves more parties than the residential closing process. This is largely due to the fact that commercial real estate transactions typically involve institutional buyers and sellers. As such, these types of buyers and sellers generally involve multiple decision makers.
In addition to the higher number of parties involved, commercial transactions typically must take into account the current tenants of the subject property. Tenants are a concern because, when commercial real estate ownership is transferred, the assignment of tenant leases may be involved. For example, upon the purchase of an occupied apartment building, the purchasing party must also assume the seller’s leasing obligations. When this occurs, new agreements with the current tenants may be required prior to closing.
Also, generally speaking, commercial real estate transactions tend to be less regulated than residential transactions. This allows purchasers and sellers of commercial property increased flexibility regarding the ways in which their transactions can be structured. This flexibility often results in a higher deal of overall complexity which, in turn, can result in higher closing costs for the parties.
Connecticut Legal Representation
Real estate transactions, whether residential or commercial, can be complicated, and it’s important to ensure that no details are overlooked during the process. At the Law Office of Benjamin S. Proto, Jr., our experienced Connecticut real estate professionals keep both buyers and sellers apprised of their rights and duties as they navigate the residential and commercial real estate transaction processes. Therefore, if you are contemplating a purchase or sale of residential or commercial property in Stratford, Bridgeport, Milford, Trumbull, Shelton, Fairfield, Orange, Derby, New Haven, or anywhere else in Connecticut or have questions regarding property you already own, please contact us for a consultation.