The 5 Step Process of Purchasing Commercial Real Estate


As the economy improves, the demand for commercial real estate has been rising year after year. Purchasing commercial real estate is a complex process; however, when you have knowledge and accurate information about the steps involved and the real estate market, the process gets much easier.

Here’s a quick overview of the process of purchasing commercial real estate:

1. The Search for the Best Property

Whether you’re looking for residential or commercial real estate, the first step is always to search for a property in a good location, with a layout that meets your needs and a price that fits your budget.

For an average buyer with limited knowledge of the real estate landscape, purchasing a commercial property can be very taxing. By investing in a commercial real estate agent, the process becomes simpler.

Commercial real estate brokers are armed with a wealth knowledge in their field. They keep up-to-date with new developments and are aware of vacancies in specific areas that aren’t on the market yet. There is a lot of information about the commercial real estate market that isn’t available online; real estate agents have access to valuable resources that aren’t made public.

With their knowledge, you should be able to find commercial real estate in the given time frame.

2. Negotiation Process

Tall buildings

Once you’ve set your eyes on a property, it’s time to begin negotiations. The negotiation process is critical in the purchasing process. Depending on the property you’re interested in, the seller likely has other buyers who also want the space.

Multiple offers can make the process difficult for you because the seller would probably go for the buyer that offers the most money. With a commercial real estate broker in your corner, you can rest assured that you’re not getting the short end of the stick.  They can also help make the case on your behalf and convince the seller to choose you over other buys.

Pre-qualification letters and any proof that indicates you have the finances to purchase the property without any trouble can give you an edge over other buyers.

3. Contingent Escrow

After the terms of your offer are accepted, a Purchase and Sale Agreement (PSA) will be created. As the buyer, you will be asked to pay a deposit to a holding company after which the PSA will be signed by all involved parties. Once the PSA is signed, the escrow is in effect. A contingency period of 30-90 days will commence.

In this escrow period, your deposit is refundable. As a buyer, you should use this time to assess the building and ensure it meets your standards.  During this time it is also very important to get a environmental report done by a professional company.  This will allow you to see into the past to make sure there are no hidden environmental concerns.  This could save you ten’s of thousands of dollars down the road. If you decide to walk out deal once the escrow period is over, you will lose the deposit. If you have any issues with the property during this period, you should contact your real estate broker or your seller and have the issue addressed immediately.

4. Perfected Escrow

Once all your concerns have been addressed and your payments have been approved, you can waive the contingency of the escrow and enter “perfect escrow”. At this point, your deposit isn’t refundable.

Perfect escrow lasts between 2 weeks to 30 days during which your bank will prepare necessary documents. These consist of grant deeds, loans and lease assignments. This is also when you need to look into insurance policies to protect your investment.

5. Closing

Money is transferred from the buyer to the seller. The grant deed will be recorded and the property is now under your name!

The process of purchasing a commercial property without the guidance of an expert can be overwhelming. The brokers at Macomb Commercial Real Estate have years of experience in helping clients buy profitable commercial real estate in Macomb.

Contact us at 586-227-9515 for a free consultation as can discuss your buying options.

Leave a reply