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Frequently Asked Questions

Below are frequently asked questions regarding the commercial real estate industry, as well as a glossary to help define terms that you may see in NAI Chase Commercial property listings.

A commercial real estate broker is a type of professional who has been licensed to help various clients buy, sell or lease real estate properties. These properties are generally used for commercial purposes. If someone wants to use a property for their home, they will need to seek out a residential real estate broker instead. An easy way to understand what a commercial real estate broker does is to imagine that they are the “middleman” between a business and a property or building they want to purchase for their business.

Hiring a commercial real estate broker can save time and money in your search because a good broker knows the properties, landlords, buyers, and sellers. You are involved in these transactions every now and then, while a broker does this every day. A good commercial real estate broker understands the total cost of the transaction and can help negotiate a deal that best suits your needs.

Commercial real estate lending is the process in which a buyer of commercial property acquires financing or mortgages necessary to make the property purchase. Without commercial real estate lending, a potential buyer would need to have all the funds necessary to purchase the property. Instead, commercial real estate lending allows businesses and commercial entities to acquire financing (like a loan) to purchase their property and pay the lender back over time.

Knowing what to ask potential commercial real estate agents can help you to narrow your results to not only finding a qualified agent, but one you will feel comfortable working with. Below are a few questions you can use to help structure your inquiry to specific commercial real estate agents or their brokerages.

  • What is agent’s reputation for experience, honesty, and attention to detail?
  • Does the agent have the experience dealing with commercial needs that my company has?
  • How large is the agent’s brokerage?
  • What is the accessibility of the agent?
  • How good is the level of communication of the agent?
  • How educated is the agent?
  • What is the agent’s strong and weak points?
  • What are the fees and commission rates of the agent and brokerage?

You can ask some of these questions directly to the brokerage or agent, or you can ask other people in your industry who have worked with that agent or brokerage in the past. This will help you to get additional feedback about the agent and their brokerage.

The general rule of thumb is that you will need approximately 200 to 250 square feet per person. But remember that you will be signing a lease that could range in term from anywhere from 3 to 10 years. So, you’ll need to add anywhere from 10 to 50 percent to the total square footage you’ve calculated in order to accommodate future growth.

Generally speaking, a broker (who is often part of a larger firm, called the brokerage) is needed to allow potential buyers access to view the property. While it’s not a strict requirement for a buyer to view properties, they may not be able to get the same levels of access to the property without them. A buyer could choose to view properties online, which does not require a broker. There may be difficulty in finding some of the properties online, however, and you won’t have as detailed of information as a broker can get. Alternatively, you could choose to talk to a seller directly to gain access to additional information or to be granted access to enter the building itself. While this is a possibility, not all sellers are going to be available at times that are convenient for you or may choose to only allow buyers to visit through their broker.

Generally, the biggest difference comes down to due diligence. Residential purchases deal with general inspections which is typically a quick one-day inspection. Residential purchases are also cheaper and are more likely a homestead. Residential deals are emotional purchases that can usually be closed within 30-45 days. Commercial property purchases involve property that is being used for business purposes, so there is more liability in the property and the land connected to it. The inspection process is extremely extensive, depending on prior usage, so the feasibility period is much longer and closing on commercial real estate deals can be a very long process.

Regardless of whether buying a home or a piece of investment property, there will always be risks involved. Your goal should be to lessen these risks as much as you can. Examples of potential problems that often lead to legal disputes include:

  • Defects in title
  • Debt service and lender requirements
  • Mechanics liens
  • Zoning and land use problems
  • Market fluctuations
  • Hazardous waste and environmental contamination

Commercial lease rates are usually quoted by price per square feet per month or per year.

These are all the NNN (referred to as Triple Net) charges such as taxes, insurance, and common area maintenance.

Typically, letters of intent are NOT legally binding. However, it is important to read everything you sign!

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