How Residential and Commercial Closings Differ

Many people have experienced residential property closings in North Carolina and might have a basic grasp of the residential real estate closing process. However, fewer have been involved in commercial real estate transactions, which can seem less familiar and more complex.

Whether you’re preparing to buy real estate in Raleigh for the first time, or if you’ve previously bought property in North Carolina, it can help to be reminded of how different aspects of the buying and sales process works. Below, we’ll explain how residential and commercial closings differ in our state.

A Comparison of How a Closing on a Commercial Property and Home Is Different

The following are some of the most notable differences between these two types of closings:

Parties Who Participate

The buyer, seller, any real estate agents representing either party, a title or escrow company representative, and a closing attorney are the primary parties who generally attend a residential real estate closing in North Carolina. 

This contrasts with a commercial closing, which is often attended by not only the interested parties, including the buyer and seller (corporate representatives), but perhaps their business partners or investors and their brokers, attorneys, lenders, and also different inspectors.

Allowances for More Negotiation

The residential real estate industry is much more closely regulated by the government than the commercial one. The residential home buying process, for example, is governed by the Real Estate Settlement Procedures Act (RESPA), a federal law, which has as its aim to ensure consistency and fairness. This explains why standard forms are used to facilitate the purchasing process of homes.

The commercial real estate buying process, on the other hand, isn’t governed by RESPA, which is often why lawyers are not only brought in to negotiate deals but to ensure sales and purchase contracts align with all appropriate legal requirements. It’s not uncommon for there to be significant negotiation of property use or purchase price and financing terms, for example, prior to a commercial closing, ultimately resulting in a customized contract. As such, it’s not uncommon for commercial closing documents to include zoning compliance, tenant estoppel certificates, leases, environmental assessments and other documents, depending on specifics surrounding the purchase.

How Real Estate Deals Are Financed

While most NC residential property buyers may rely on a sole mortgage lender at a bank, for example, to fund their purchase of a home, those buying commercial real estate may source funding for their purchase from various sources. These may include investors, their own personal financial accounts, commercial lenders, etc.

Assessing for a Clear Title Versus Performing One’s Own Due Diligence

Those buying residential real estate can expect a title search to be performed to identify any potential issues with the deed to the home, like mechanics or tax liens. This often results in a warranty deed being issued to a buyer. 

The onus falls more on the buyer to assess for how well a commercial property is, including whether there are any liabilities or risks associated with it, such as tenant issues or environmental concerns. This often results in a quitclaim deed being what transfers the property to the other party (a transfer without assurances or guarantees).

Where To Turn For More Information About Commercial or Residential Real Estate Closings

North Carolina is one of a few states that require attorneys to handle residential real estate closings. Having an attorney involved in the commercial property purchase process in Raleigh is essential to ensure legal compliance. 

Our legal team at Anderson Jones, PLLC is here to guide you through the real estate sales or buying process, no matter if it involves a personal home or a business property. So, consider reaching out to us with any questions about real estate closings for trusted guidance as to how this process works.