Buying a small commercial property without an agent - Advisable?

Question

I have the opportunity to buy the commercial retail unity where my business is located. We just did an extensive build out so we know the property intimately. The seller has had a valuation of their whole portfolio which includes multiple units in our same complex and is offering us the space at the appraised value. They said they are firm on their price and will not pay commissions and is suggesting we use a local bank (which we also bank at) who has a legal team as well if we need them to draw up anything. I've never done a real estate transaction without an agent, but generally, find after the contract is negotiated they aren't involved much. Is there a value in an agent for getting the deal closed that I am missing? It's an unlisted property. What situations would require a lawyer? Just writing up the contract?

Marcos Ruvalcaba · Answer

I purchased a commercial space without an agent, before I became an agent. I ran into a few problems. The "association" was ran by one owner who acted as president, treasurer and secretary... and he/she was comingling funds and had the wrong insurance on the building etc etc. Even though the seller paid for an inspector, I probably should have hired one myself instead of letting him run it. I later found termites in one area and recently found the entire building was not grounded. If I was going to do it all over again, I'd find a commercial realtor who has a CCIM designation and specializes in the commercial asset class you're interested in. Even when a portfolio has be valuated, someone like a savvy real estate accountant or CCIM can double check their numbers. I'm assuming they had a proforma. Did they show you the actual financial analysis backing up their valuation?

Henry Clark · Answer

OP definitely run the contract thru attorney.

This is a standalone building?  Since you’re familiar with the building I would look more outside.   Can you describe the building and the surrounding common areas, signage, parking, etc?  Is this an older building?  Any grandfathered in issues that will go away?  Any epa issues?  External utility issues?  Do you get or have the google map address? Etc.  Etc.

Jason Zundel · Answer

At this point you are right that much of the agent's job is done OTHER than being an advocate for you with intimate knowledge of the documents and paperwork involved. Thus, while seller has made it clear they will not be paying for any commissions, and a real estate agent may not be the best bet, you may want to have an advocate for yourself to review the documents and ensure everything is kosher, especially if this is a new area of investment (commercial is different enough from residential to justify this in my opinion). Hiring an attorney to take a look at the drafted documents from the lender and the seller will actually cost less in many cases then the percentages charged by a real estate agent, and could save you significant heart ache in the long term. Even just knowing that you will have one can affect how the documents are drawn up. My firm does not offer this type of representation, but if you don't have a specific connection, Martindale.com is a decent option for finding local representation.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Laura Casner · Answer

Yeah the knowledge of documents and paperwork part is what my hesitation is but I do have a lawyer who reviewed lease documents for me and I could for sure get my own.

Marcus Auerbach · Answer

You don't need an agent in the traditional sense: you can fill out a OTP contract form and negotiate on your own behalf. But you don't know what you don't know, so you need someone with the experience to sniff out problems.

Most attorneys are surprisingly bad when it comes to RE (because that is not what they do on a daily basis) - except the ones who specialize in RE. Does not matter if you hire an attorney or an agent, as long as they have ample experience with the type of property you are buying. With an agent, you can roll the cost into the PP, but make sure they are commercial and not residential and not a noobie.

Ronald Rohde · Answer

You may not need an agent since you already have the building and pricing guidance.

Definitely hire an attorney, don't rely on boilerplate forms. Lender is not your friend.

Seth McGathey · Answer

As an agent myself, what you might want to consider is finding an agent knowledgeable in commercial deals and negotiate a lower commission based on the fact that they are only helping you with the negotiations and paperwork. I am a firm believer in not lowering my commission for anyone, but I think this would be a time when I would consider it fair since I am not doing a big part of the upfront work.

Laura Casner · Answer

It's one unit I'd be purchasing in a mixed use condo/retail building with an HOA. 2008 building. There is parking and CAM, HOA, etc. that we already pay as renters in NNN.

Laura Casner · Answer

We are the Tennant and it's NNN so we've seen all their documents, done an inspection AND done a massive build out. The HOA was a mess but there is an HOA management company now who's done a lot to sort it out.

Buying a small commercial property without an agent - Advisable?

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