- There are a lot of fast moving parts in a commercial real estate closing.
- For example, its very important to have your own settlement statement to compare to the title company’s.
- There are a lot of specific areas in the settlement statement to keep track of. And a good lawyer can help you do that.
I started last week’s blog article talking about how exciting a new year is. I’m coming back to that well again this week. I don’t know – I guess I’m just really looking forward to 2023 and all that it will bring. I know a lot of people are concerned about where the economy is headed. And that’s certainly legitimate. But I also see a lot of opportunity on the horizon. And that is exciting.
Specifically, I think there are going to be a lot of commercial real estate deals completed this year. Once everyone adjusts to the new normal – whatever that may be – I think we will see a lot more deals moving forward.
As you probably know, commercial real estate deals are complicated. There are a lot of moving parts – especially as you get close to the closing date. As a result, you really want to make sure you are on top of everything that is happening. And, of course, have a great lawyer to guide you through the process. And one area where this is especially important is in the closing statement. So that is what we are going to talk about this week.
Closing Process is Very Busy
Anyone who has closed a commercial real estate transaction already knows this, but there are a lot of moving parts during the closing process. And the days move by very quickly. As a result, you and your team need to be on top of everything that is going on.
For example, its extremely important to monitor the title search and title commitment. Of course this is where a great real estate lawyer should lead the review. But its very important to make sure there are no challenges to the title of the property. How that is done is a topic for another blog article in the future.
This week we are going to focus more on the settlement statement. It will generally come from the title company – but you should definitely make sure you have your own internal copy that you put together. Because as good as the title company may be, it may not know everything that goes into the closing.
As a result, every step of the way – with every version of the settlement statement that you get from the title company – you need to review it and make sure there are no errors.
What to Look for in the Settlement Statement
While the entire settlement statement is of course important, here are a few specific things that you should look for:
- Title fees – These will be provided for by the title company. In general in Texas, the seller pays for the owner policy and the buyer has to pay for any endorsements and the simultaneous loan policy. If you have any question about any of the fees, check with the title company.
- Lender fees – The lender will likely provide its own settlement statement to the title company to include in the overall one. Its important to go through the lender’s statement to make sure the fees are consistent with what was proposed in the original term sheet.
- Credits – Either in the purchase agreement or just as an agreement between the parties, the buyer and seller may agree to some credits. Its important to check to make sure those are included in the settlement statement because the title company may not be aware.
- Prorations – The purchase agreement should explain how the prorations are calculated. But its always important to have your own calculations to check to make sure they are correct.
This is, obviously, just a few of the important pieces of the settlement statement. You should always check and double check each version to make sure its correct. And having a good lawyer to also check and walk through it with you is always a great idea.