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Commercial Real Estate Market During COVID-19

Times are challenging for most around the globe. We’re living in an uncertain world, and when there is uncertainty, investors and people alike hang onto their assets. In today’s environment, some businesses are looking to offload property in order to stay economically viable. Even during these times, you should never rush a transaction of this nature — there’s too much at stake.

Why Do You Need A Real Estate Lawyer?

This is a fair question, but the short answer is to protect clients. The closing process for commercial real estate is complex, whether you’re at the negotiating table or signing the final paperwork. So how does a real estate lawyer “protect their client?” Let’s dive right in!

Is the deal legitimate?

You’ve been researching and researching for months, maybe even years, and finally found the deal of a lifetime. We caution you, take a step back, and understand why that property is priced the way it is. A real estate lawyer can help uncover any liens or issues with the building that might be leading to that low price.

Your interests are our interests

With a real estate attorney, we can prepare you for the unknown and unexpected. We help with negotiating the procedures if the deal for some reason falls through. Real estate lawyers work to minimize their client’s risks and liabilities.

Understanding zoning laws

It’s important to know the zoning laws for the property you’re about the purchase. You might have an idea of building a hotel in a certain area. However, if that area is not designated for residential use, you will run into problems. An experienced attorney will help you understand the current situation as well as provide options for permits and authorizations for any projects.

How Do Real Estate Attorneys Help Businesses?

Owning a business is a challenge itself; to try and keep up with business and real estate law as well as tax and financial issues is nearly impossible.

Disclosure

Commercial real estate buyers are expected to evaluate the property and the terms of the transaction for any potential issues. Commercial sellers don’t have an obligation to disclose known defects, unlike in residential real estate. The onus is shifted to the buyer to make sure everything is in order before going to the negotiating table.

Property Valuation

There are a few different ways to approach property valuation: Cost, Market, and Income.

  • Cost Approach – This approach puts a ceiling on the market value of the property. This is important because if investors can build a similar property in the next property over that brings in the same value, they would essentially pay more for a new building.
  • Market Approach – The market approach is the most similar to residential in that it compares the property to adjacent properties. However, adjustments can be made for functionality, size, and age of the property.
  • Income Approach – If your building produces income through lease payments, then the income approach might be best. This method determines value by how or if the present value would support future cash flow. Basically, you are subtracting estimated property expenses (e.g., taxes, management fees, upkeep, etc.) from expected revenue to arrive at the actual value.

It’s essential to protect your assets with limited liability; It’s Business 101. By having an experienced real estate attorney on your side, you are making an excellent first investment in all of your future real estate transactions. Give Hoegen & Associates a call today at 570-820-3332.