If you own commercial real estate, the day may come when you decide to sell a property. While any type of real estate transaction can be complex, commercial real estate transactions can be particularly complicated and it's important to take steps to protect your financial interests.
To help ensure that you are protected from legal liability and that your financial interests are promoted, it is important to create a purchase-sell agreement. A purchase-sell agreement allows you and the potential buyer to list the specific terms and conditions of the transaction in a legally-binding contract.
Get ready to negotiate
While creating a purchase-sell agreement is a wise step, it can also take a substantial amount of time and effort. Initially, you and your attorney will come up with general terms that you feel suit the circumstances of the transaction and then send the proposal to the buyer. The buyer will then review the proposal and likely come back with changes.
These back-and-forth negotiations can take days, weeks or even months until both parties feel comfortable. In some cases, you may feel pressured to give in to certain terms just to reach an agreement, or you may decide to end negotiations and search for another buyer.
Terms to consider
Once an agreement is reached, a purchase-sell agreement must include information, such as the condition of the property for sale and whether you are selling the property "as is." Another important aspect of the agreement relates to the purchase price of the property and any other expected expenses. Though you may have a set sale price for the property, adjustments may take place at the time of closing. You may also need to consider how earnest deposits are handled and under what conditions a deposit may be retained or refunded.
You should also be prepared for a buyer to negotiate when it comes to setting forth contingencies under which the contract could potentially become void. For instance, if the buyer signs the contract and later discovers problems with the property that were not disclosed, the buyer could choose to uphold the contract despite the issues, allow you to fix the issues or terminate the contract.
Because of the complicated nature of commercial real estate transactions, it's wise to enlist the help of a knowledgeable legal professional who can represent your best interests in negotiations and ensure that your purchase-sell agreement contains favorable terms.