How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask socrateaser Your Own Question
socrateaser
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 37952
Experience:  Attorney and Real Estate broker -- Retired (mostly)
10097515
Type Your Real Estate Law Question Here...
socrateaser is online now
A new question is answered every 9 seconds

What are the customary closing costs and interest on a

Customer Question

What are the customary closing costs and interest on a commercial building to the seller and to the buyer.Seller will be carrying a contract.
Submitted: 2 months ago.
Category: Real Estate Law
Expert:  socrateaser replied 2 months ago.

Hello,

Commercial real estate contracts do not have the sort of "customary" costs, which are more commonly associated with residential home sales (such as a 50/50 split of closing costs, title insurance, etc.). The only "customary" cost is the real estate sales commission, which is usually in the 10% range, rather than the 6% for residential sales.

In my business dealings, I have always advised clients to sell the property on terms that require the buyer to pay all closing costs (except for pro rata property taxes). That way, there's nothing to negotiate. You are selling property X for $Y, and you're not interested in the collateral costs, because you're not paying any of them. The buyer will have to counteroffer based upon what he/she believes is affordable -- but you will know exactly what amount you are getting net from the deal, because you're not paying the costs, no matter what costs are charged, and by whom.

Concerning interest rates, a large institutional lender is likely to give a commercial borrower a rate, close to prime, which is currently 3.50% -- on a building, but only if the building is likely to generate high rents. However, as a seller carrying a note for a borrower, you are competing not with the prime rate (which the borrower undoubtedly cannot get because if he/she could, he/she wouldn't be borrowing from you) -- but rather with "hard money" private lenders, who typically charge 2.5 times the prime -- or more. So, for this issue, my answer is that 2.5 X 3.5 = 8.75% is extremely reasonable for seller financing of a commercial property.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

Expert:  socrateaser replied 2 months ago.

Hello again,

I see that you have reviewed my answer, but that you have not provided a rating. Do you need any further clarification concerning my answer, or is everything satisfactory?

If you need further clarification, concerning this matter, please feel free to ask. If not, I would greatly appreciate a positive feedback rating for my answer (click 3, 4 or 5 stars) – otherwise, I receive nothing for my efforts in your behalf.
Thanks again for using Justanswer!

Related Real Estate Law Questions