The contract to purchase a commercial property is similar to the contract to purchase a 1 – 4 family residential property, however commercial properties are more apt to be irregular with more snakes, landmines and grass fires. The commercial contract is several more paragraphs and pages.
We discuss page one with the first 3 paragraphs.
Although the form is fill in the blank, there are challenges which depend on the uniqueness of he property. We need to be concerned with the circumstances of the buyer and the wishes of the seller. Often the wishes of the seller are diametrically opposed to the buyer. Sometimes other involved people and institutions, such as inspectors and lenders, can not oblige the time table of the seller. This will be a good listen for you.
The Great of State of Texas gives me authority to use approve contract forms and amendments.
Can not scratch through and change, however the principles, buyers, sellers, tenants and landlord can scratch through, change, rewrite paragraphs and then initial.
They should consult me first to discuss correct words, ramification and unintended consequences.
Who can sign?
• Husband AND wife to make it binding
• Legal owners and their legal reps
• LLC requires the Managing Member
• Uniform Gifts to Minors Act – parents or guardians
• INC. = Corporate officers with authority means President and Secretary.
• Durable Statutory Power of Attorney – notarized
The principals involved will need to show proof of authority to the title company.
In Paragraph One stating the names of buyers and sellers…. Sometimes the client wants to write “Or Assigned”, but there is a different place in the contract for that.
Paragraph 2 – “Property” – Get the correct legal description. Know what your are doing.
An address is not adequate nor legal. The post office gives address to deliver mail Vacant land do not have an address, because not deliverable.
A correct legal description in necessary because other involved instituions may use the contract.
The title company and lender may use your contract words in Para 2 legal description.
The buyer may get ownership of part of the property if not done correctly.
Review the county tax records for legal descriptions
Sometimes we may need an Exhibit “A” with metes and bounds” of the properties, if available. Can get “Metes and Bounds” description from the survey, deeds, title company insurance commitments and court house records.
I helped a buyer from California to buy a riverfront home on a bluff, which had 2 acres of land comprised of 6 irregular sized land parcels.
I reviewed the county plat maps and correctly wrote the contract offer to include all 6 legal descriptions. He and wife bought the river home and they were happy.
3 years later I was named in a lawsuit because he could not legally ID one of the seven land parcels at his home.
His attorney later discovered that the title company insurance commitment had omitted one of the land parcel legal descritions from the title insurance commitment. One parcel had not been identified to have insured ownership of the buyer.
I had correctly written the contract to include all land parcels in the purchase. The Title insurance company revised the title insurance commitment. It cost some legal attorney fees.
Helped a buyer with 2 buildings which contained 18 commercial warehouses. Each was on approximately half an acre.
After the title company received the signed contract, then contract said that ten days later title company would send the insurance commitment.
The legal description only included of the two parcels.
The county appraisal district had two account numbers, each of which had a separate legal descrition. The county appraisal district had a main address with property account number, however it had a co-joining account number sometimes referred to as a “Child” account.
I made the phone call to the title company and they made the correction.
I also included the buyer in the email discussion to let buyer know I was doing a good job. Sometimes clients do not know what is happening in the background.
Paragraph 3 – “Sales Price”
Allows for Down payment amount, borrowed amount which equal the sales price.
Please know that a loan from lending institution is the borrowed amount.
IF buyer is getting private loan from a friend, it is not formal financing included in the borrowed amount. Thus the transaction is a cash offer with no loan and no “Financing addendum” and No stipulations to terminate if buyer does not obtain financing from the friend.
Thus if the friend decides not to loan the money to the buyer, the buyer could lose the deposited earnest money and money already spent on acquisition costs
Usually the seller will require documentation that the buyer had enough cash on hand to pay the down payment stipulated in Paragraph 5 D.
The seller may want “Proof Of Funds” such as a copy of buyer bank or investment account showing enough liquid assets for the down payment.
Buyer can scratch out the account number to maintain some privacy.
This may sound intrusive, but from seller perspective, it is Not uncommon for some buyers to make contract purchase offers with only a hope and a prayer.
In an upcoming podcast we will discuss the rest of commercial contracts plus financing addendums.
Soon we will discuss how to save your thousands of dollars the future property taxes. A contract phrase which no other real estate will discuss.
I should charge admission fee in advance for this contract technique.
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