Hi all
I am about to enter into a commercial contract and I wanted some ideas about terms. With a residential loan, standard terms are about 30 days to settlement with about 14 days for finance approval. What happens when the amount is much larger than for a residential loan with much more due diligence needing to take place?
Your ideas are appreciated
Karen
I think you need a long settlement for you due dilligence, asbestos certificates, finance etc. Different rules apply for commercial finance so be warned. Many banks have trouble getting the commercial valuers, who will also want to see any leases.
Personally I’d go for 60 days with my due diligence cut off at 30 or so.
Karen,
With our last commercial loan, the timing looked something like this ;
Offer accepted by Seller
Finance clause released 5 weeks after offer acceptance
Due diligence clause released 9 weeks after offer acceptance
Settled 10 weeks after offer acceptanceIn terms of due diligence, timing we’ve found depends on two things ;
1. How thorough you are with your checking (in your control).
2. How sloppy or efficient the Seller is with their paperwork (not in your control).We found the due diligence process was a breeze with our latest commercial venture as the Seller was highly organised with all of the property details and had the lot neatly filed away in one manila folder. Timing allocated for DD in the contract was more than adequate.
Previous to that, the second last CIP we purchased had a completely disorganised, haphazard disgusting Seller who didn’t know what day it was, let alone any paperwork on the property. In that case, the same amount of time applied in the contract of sale was not adequate.
Which category does your Seller fit into ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks Dazzling
what about a deposit?
When I buy residential I put down a $1000 deposit. What should I offer for a 1 mil + property?
Karen
Karen,
To answer the deposit question sensibly, one would need to know everything about the deal, the Seller, their motivation, your acquisition strategy, method of sale, any underlying advantages etc etc etc…
For example, if you thought the Seller was desparate for the deal to cross the line, you might go low ball with a high deposit and unconditional to show you are genuine.
On the other hand, if the Seller is nonchalant about the deal (i.e. they are in the position of power) and is making good money on the prop now, and may consider selling if an outrageously high unconditional offer is presented….well, that’s a whole different ballgame, and presenting an offer with a piddly deposit with a whole bunch of ‘get out’ clauses for you as Buyer will rightly get screwed up and go straight into their bin. Everyone’s time – especially yours – is being wasted.
You didn’t answer last time….once again….what type of Seller do you have ?? If the answer is “Not sure”….you need to do far more work before making an offer, IMO.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Originally posted by Jaradnkaren:what about a deposit?
When I buy residential I put down a $1000 deposit. What should I offer for a 1 mil + property?
I think the first thing you’re going to have to do is find out how much the bank is willing to lend you on the property. As far as i know, commercial property is leveraged alot less than residential (65-75%). Start there and work your way backwards.
Lumwood.
– “Life is what happens when your busy making other plans” –
Karen,
So how did you go ??
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