If you are interested in investing in real estate, but have no idea how to proceed, look no further, for below are the typical steps involved in a commercial real estate purchase.
This is usually the first step in a real estate purchase. The real estate agent will draft a purchase agreement that is to be signed by both the purchaser and the seller. The agreement would consist of the price of the property, the type of title (freehold or leasehold), conditions attached to the sale and the deposit to be paid by the buyer. The purchase agreement would also detail the items included in the sale, curtains, carpets, wall decorations etc.
This is generally a time period (usually 10 days) during which the purchaser inspects the property to ensure that it adheres to the purchaser’s standards. Generally it involves checking the condition of the property, whether some faults have gone unreported, and whether the actual value of the property commensurate with the amount of money the purchaser is willing to pay.
Land information Memorandum / Search title
A Land information Memorandum details useful information with regards to the property. It is generally provided by the local council and consists of liabilities of the property – presence of hazardous substances, prone to earthquakes and floods etc. – , the rates of the property and classifications related to the piece of land that the property sits on. The title search, meanwhile is ascertain the type of title the land -on which the property sits- holds, whether it is leasehold or freehold.
Review bank documents
The seller would then review the buyer’s bank documents and assess whether it’s genuine. A mortgage by the bank usually consists of a promissory note and a mortgage document. A promissory note is generally a letter by the buyer that states that the buyer is willing to repay the loan amount, along with the interest incurred. The note would also include the terms of the loan and the proposed time period for repayment. A mortgage document, meanwhile states that the buyer owns all rights to the title, but is unable to transfer ownership until the loan amount is fully repaid. In the event that the loan is not repaid in full, the lender is allowed to repossess the property.
This would be the last stage in the purchase. The buyer would deliver payment, whereupon the seller surrenders the deed to the buyer. The new deed will then be registered with the local land registrar’s office.
These are the general steps involved with a commercial real estate purchase. The process may seem a little tedious, as with most other legal proceedings, but is easily understandable if you acquire the services of an experienced real estate agent.