Buying or selling commercial property isn’t just a bigger transaction; it’s a completely different ballgame than residential real estate. From due diligence to financing, the process is longer, riskier, and packed with pitfalls that can derail deals. Here’s 5 reasons why commercial closings demand extra expertise (and how savvy investors prepare.
By Hayley Baldinelli, J.D.
1. Commercial Due Diligence is a Marathon (Not a Sprint)
While residential closings have an average of 10-day inspection periods, commercial inspections can take 30-90+ days. Due diligence may include:
- Phase I Environmental Reports (soil contamination risks)
- ALTA Surveys (precision boundary/mapping)
- Zoning & Entitlement Reviews (can you even build what you want?)
- Tenant Lease Audits (for income-producing properties)
Example: A Miami investor nearly bought a strip mall until due diligence revealed an underground fuel leak from a 1980s gas station. Cleanup cost: $500k+.
2. Commercial Financing is Harder (and Slower)
While conventional loans can close in just about 30 days, commercial loans are often more complicated with:
- Strict lender requirements (higher down payments, personal guarantees)
- Appraisals based on income (not comps)
- Prepayment penalties (3-5 lock-ins common)
Florida twist: Lenders often require terrorism insurance for coastal properties.
3. Commercial Title Issues Are High-Stakes
Standard (residential) title searches usually go back 30-50 years, while commercial title searches can go back well beyond 50 years in order to uncover issues such as:
- Old liens, easements, mineral rights
- Easement disputes (e.g., shared parking agreements)
- Tenant rights (long-term leases can override ownership changes)
Red Flag: A Tampa warehouse deal died because a 1940s railroad easement blocked truck access.
4. Commerical Contracts Are Negotiated (Not Standarized)
Typically, residential contracts are written with standard FR/BAR or “as-is” boilerplate templates. In contrast, commercial deals are customized to accommodate each unique deal.
Commercial contracts may include:
- Custom purchase agreements (earnest money terms, inspection contingencies)
- 1031 exchange clauses
- Seller financing addendums
Pro Tip: Never sign without an attorney review as commercial contracts favor the drafter.
5. Closing Costs Are Higher
| Fee | Residential Avg. | Commercial Avg. |
| Title Insurance | 0.5% of price | 0.75–1.5% of price |
| Survey | $400–$800 | $2k–$10k (ALTA) |
| Environmental Report | Rare | $1.5k–$15k |
Florida Focus: Some counties charge double recording fees for commercial deeds.
6. Avoid Closing Disasters
- Start Due Diligence Early (Before signing the LOI)
- Use a Commercial-Savvy Title Company with an attorney on staff (like Preferred Settlement Services), as Residential firms often miss nuances.
- Negotiate Inspection Periods (45+ days for complex assets).
- Demand a Pro Forma (Project costs/taxes before committing).
Commercial deals don’t fall apart at closing, they explode in due diligence.
Need a Florida Commercial Closing Team? We specialize in:
- Portfolio acquisitions
- 1031 exchanges
- Mixed-use zoning challenges and more
Get additional information and support from CREA.