Shift Into
Your Best Business Model

Essentials of a commercial real estate sale

On Behalf of | Apr 6, 2023 | Commercial Real Estate |

In New York, commercial properties can include buildings used for offices, retail establishments, industrial facilities and other uses. The sales differ from residential real estate transactions as they involve much more complexity in legal, financial and logistical issues. While each transaction differs, commercial real estate sales usually involve the following essential elements.

Listing agreement

A commercial property sale typically begins with the building’s agent or owner signing a listing agreement with a commercial real estate brokerage firm. The contract documents the terms and conditions under which the broker will seek potential buyers and market the property.

A commercial sale often involves multiple parties, such as lenders, tenants and owners, that sellers need to consult and coordinate with during the sale process.

Buyer due diligence

Before completing a sale, potential buyers usually perform extensive assessments and analyses to gauge the building’s condition and its prospects for profitable financial performance. Due diligence items can include reviewing existing tenant lease agreements, historical financial statements, real estate appraisals and other relevant information. If tenants have long-term lease agreements with below-market rents, a buyer may not be able to generate enough profit to make the building purchase feasible.

Valuing commercial properties typically involves more complexity than residential property. Commercial appraisals consider a building’s ability to generate income as a business rather than focusing strictly on its resale value.

Purchase agreement

Upon satisfactory completion of due diligence, a buyer typically submits an offer as a purchase agreement to the seller. This document contains the purchase price and other terms of the real estate sale, such as the transaction closing date and contingencies. Due to the complex nature of commercial transactions, the contract may contain additional contingencies regarding zoning and financial records.

Title and escrow

Before completing the sale, the buyer must verify that the buidling property has a clear title and that no active liens or encumbrances exist. An escrow agent usually assists in this process and manages the transaction to ensure the completion of all relevant paperwork.


The final step in the commercial property sale process is closing, where the property officially changes hands from the seller to the buyer. In this transaction phase, the seller and buyer record the title transfer, deeds and other legal documents and exchange funds.

Commercial property sales take longer and require a deeper level of due diligence compared to residential real estate transactions due to the more complex nature of the transactions.