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We did a podcast about each paragraph about the Commercial Texas Promulgated contract.
So why did we not discuss the 1 to 4 family contract?
Because the commercial and residential contracts have similar features except the commercial is several pages longer and has more complicated wrinkles.
For my friends that want to sell residential homes, I do not want to appear disinterested or unqualified.
I spent over 12 years selling single family homes and now I only help friends or absentee landlords who need snake proof boots on the ground near the house.
I do not specifically advertise or farm single family neighborhoods.
Maybe because generally single family homes are less complicated with fewer snakes, landmines and grass fires.
However, sometimes there is an unexpected snake in the grass.
The problems are not caused by the home. The challenges are caused by people and institutions with changing personnel, guidelines, policies, rules and laws.
Let’s talk about the differences between the residential and commercial contracts and what to expect. What rocks to turn over and which bush to avoid.
In not specific order.
Residential properties may have different tax laws and exemptions. Your home is your castle.
Pay careful attention to the effective date, the day the contract clock begins to tick.
Residential contracts are effective and start which both buyer and seller have signed the contract.
Commercial contracts are effect and start the date the title company receives the contract. The earnest money from buyer is due within 3 days, which includes weekends and holidays. The effective date starts the option feasibility period which then starts the days to terminate if you can not get the loan specificed in the Commercial Financing addendum.
Therefore we should know the residential and commercial contracts have different effective dates.
A SFR is required to have a “Seller Disclosure Statement”, preferably when the home goes on the market, however it can be 7 days after the effective date.
Commercial Contracts are not required to provide a Property Condition Statement. Although there is a box to check, which can require the Condition Statement. If I represent the buyer and contract requires seller provide the State Form Property Condition Statement, and the seller instead provides private brokerage company form statement of condition ….. is the seller then in breach of the contract and can the buyer then void the contract at will? Maybe.
That can be our secret … do not mention it to anyone.
Residential closing date can normally be written for 45 days after effective date because residential appraisals are easier and quicker
Whereas commercial closing dates are normally 75 to 90 days after the effective date.
This allows several weeks for a $2,000 Environmental Phase One study by an environmental consultant. (maybe not with multifamily). I have never had a lender require an environmental study on a multifamily property, except for one bank with a new inexperienced loan officer who had some experience with warehouse loans.
Several years after selling a 40 unit multifamily, I got a phone call from owner who was remodeling several units. He sais that the remodel contractor required environmental guidelines to remove and dispose of some sheetrock. Another contractor in previous year had caulked the joints between the sheetrock with a caulk which contained asbestos, which he bought from a well known home repair big box retailer.
A SFR contract may also include Owner Association Addendum for docs to be given to buyer and also other docs which a big brokerage firm as created from their attorneys.
Commercial loans are not regulated by government and lenders can offer different kinds of loans, depending on how strong the buyer is.
The residential loans are more standardized in order to be packaged and sold to investors.
Residential appraisals may cost $600 to $800 and inspections and surveys also.
Commercial inspections, appraisals and surveys and environmental studies maybe $2,000 and higher for each, depending on the size and complexity
So generally, SFR are easier and quicker with lower acquisition costs and fewer snakes.
Once I was selling a duplex for a very nice elderly lady in Dallas, Texas. She told it that it was not occupied.
However, the bottom 2 bedroom apt of the duplex was occupied the Dad and two teenage daughters and 2 german shepherds and 2 cats.
The inspector refused to go inside because of the smell.
Life is good.