Commercial Real Estate Process FAQ

Most commercial transactions take 60–120 days from signed LOI to closing. Cash deals on simple NNN properties can close in 30–45 days. Development deals with entitlements can take 6–18 months. Complex multi-property or lender-heavy deals often stretch to 120–180 days. The biggest timeline variables: financing (30–60 days for underwriting), environmental assessments (Phase I = 2–3 weeks, Phase II = 4–8 weeks), and entitlements (highly jurisdiction-dependent).

A Letter of Intent (LOI) is a non-binding document outlining the key deal terms — purchase price, earnest money, due diligence period, contingencies, and closing date. It's essentially a negotiating document. A Purchase and Sale Agreement (PSA) is the binding contract drafted after the LOI is accepted. The PSA covers representations and warranties, environmental indemnifications, default remedies, and dozens of other legal provisions that don't fit in an LOI. Commercial LOIs are often heavily negotiated before moving to PSA.

Due diligence is the buyer's opportunity to investigate everything about the property before closing. Typical commercial DD includes: Phase I Environmental Site Assessment, Property Condition Assessment (PCA), ALTA survey, title examination, tenant lease review and estoppels, financial review (3–5 years of operating statements), zoning verification, and legal review. Due diligence periods typically run 30–90 days. If you find problems, you can negotiate, walk away (while earnest money is refundable), or request extensions.

Commercial earnest money typically ranges from 1% to 5% of the purchase price — often structured as initial deposit plus additional deposit after due diligence. A common structure on a $3M deal: $30K initial (refundable during DD period), additional $60K (going 'hard' / non-refundable) after DD expires. For larger or more competitive deals, earnest money may be higher and go hard sooner. Everything is negotiable.

When earnest money goes 'hard,' it becomes non-refundable. Typically this happens at the end of the due diligence period. Going hard signals buyer commitment to close — if the buyer backs out after that point, the seller keeps the earnest money as liquidated damages. Going hard is a key negotiating point: sellers want it to happen earlier; buyers want it to happen later (or be contingent on additional conditions like financing).

Absolutely. Commercial transactions are far more legally complex than residential — representations and warranties, environmental indemnifications, title exceptions, tenant estoppels, assignment of leases, and entity structuring. Title companies cannot provide legal advice. A commercial real estate attorney typically quarterbacks the paperwork from PSA negotiation through closing. Expect $3,500–$15,000+ in legal fees for a typical commercial transaction.

An ALTA/NSPS Land Title Survey is the gold standard for commercial properties. It maps the property boundaries, all improvements, easements (recorded and visible), encroachments, setbacks, access points, and flood zone designations. Most commercial lenders require an ALTA survey. Cost: $3,500–$15,000+ depending on property size and Table A items requested. An ALTA survey takes 2–6 weeks to complete.

Estoppels are signed statements from each tenant confirming the lease terms, rent amounts, security deposits, unpaid obligations, and any existing claims against the landlord. They prevent a tenant from later claiming different lease terms than what was represented during the sale. Lenders typically require estoppels on every tenant. They're requested during due diligence and often take 2–4 weeks to collect.

A Phase I ESA is a records-based investigation conducted by a licensed environmental consultant to identify Recognized Environmental Conditions (RECs) — evidence of existing or past contamination. It reviews historical aerial photographs, environmental databases, and includes a site visit. Required by virtually every commercial lender. Cost: $2,500–$4,500. Timeline: 2–3 weeks. If RECs are identified, a Phase II ESA with physical soil/groundwater testing may be required.

A commercial closing statement (sometimes called a settlement statement or HUD for commercial) reconciles every dollar flowing through the transaction: purchase price, loan proceeds, prorations for rent, property taxes, CAM charges, utility deposits, earnest money, commissions, attorney fees, title insurance, and recording fees. Prepared by the title company. A true-up reconciliation happens 60–120 days post-closing for actual operating expense figures.