Understanding the Commercial Real Estate Sales Transaction Process: A Step-by-Step Guide

Buying or selling commercial real estate is one of the most significant decisions a business owner or investor can make. Whether you’re acquiring a property for your company’s operations, expanding your investment portfolio, or preparing to sell an asset you’ve held for years, the sales process involves a series of structured steps that protect both parties and ensure a successful closing.

Understanding what to expect at each stage can help you move through the process confidently, avoid delays, and make well-informed decisions.

Below is a clear, step-by-step breakdown of the commercial real estate sales transaction process.

1. Define Your Goals and Assemble Your Team

Before entering the market, buyers and sellers should take time to clarify their objectives:

Buyers should determine:

• Property type (office, retail, industrial, flex, land, etc.)

• Location requirements

• Intended use or investment goals

• Budget and preferred financing structure

• Expected timeline for closing or occupancy

  
  

Sellers should consider:

• Desired sale price

• Timing and motivation

• Property positioning and marketing strategy

• Recent property performance (NOI, occupancy, cap rate, etc.)

• Any operational or physical issues that may affect value

  
  

Most deals begin by partnering with a commercial real estate broker who specializes in the asset type and market. They help set pricing, evaluate opportunities, manage negotiations, and streamline communication among all parties.

2. Initial Property Search or Property Preparation

For Buyers

Your broker will uncover opportunities through:

• On-market listings

• Off-market relationships

• Broker networks

• Comparables and market data

  
  

Buyers typically tour multiple spaces to evaluate suitability, condition, and pricing before narrowing down options.

For Sellers

Your broker prepares the property for market by:

• Analyzing comps and market conditions

• Recommending a pricing strategy

• Creating a marketing package (OM, photos, floor plans, financials, etc.)

• Listing the asset across brokerage networks

  
  

This upfront preparation ensures the asset attracts qualified buyers early in the process.

3. Submit and Negotiate the Letter of Intent (LOI)

Once a buyer identifies a property, the next step is presenting a Letter of Intent (LOI) — a non-binding outline of the key business terms.

An LOI typically includes:

• Purchase price

• Earnest money deposit amount

• Due diligence period

• Closing timeline

• Financing terms

• Contingencies

• Expectations for prorations, repairs, or tenant estoppels

  
  

Sellers review, counter, and negotiate until both parties agree on terms.While the LOI is not legally binding, it sets the framework for the formal contract.

4. Enter the Purchase & Sale Agreement (PSA)

After LOI acceptance, the parties move to a Purchase & Sale Agreement, a legally binding contract drafted by attorneys.

The PSA addresses:

• Final terms agreed upon in the LOI

• Representations and warranties

• Title and survey requirements

• Environmental and third-party reports

• Due diligence timeline

• Earnest money structure (initial vs. non-refundable)

• Closing conditions and prorations

• Remedies for default

  
  

Once the PSA is executed, the earnest money is typically deposited with the title or escrow company, and the due diligence period formally begins.

5. Conduct Due Diligence

The due diligence phase is critical for protecting buyers and providing clarity for sellers. This period allows the buyer to inspect the property, review documents, and verify financial and physical conditions before proceeding to closing.

Common due diligence items include:

• Property inspections (roof, HVAC, structure, etc.)

• Environmental reports (Phase I, Phase II if needed)

• Title and survey review

• Tenant rent rolls and lease audits

• Operating expenses and historical financials

• Zoning and permitted use verification

• Appraisal (if financing is involved)

  
  

If issues arise, buyers may request repairs, credits, or PSA amendments.Once due diligence is satisfied, the earnest money often becomes non-refundable.

6. Secure Financing (If Applicable)

For buyers using financing, lenders typically require:

• Property appraisal

• Environmental reports

• Personal or corporate financials

• Rent roll and lease summaries

• Operating history

  
  

Financing timelines can vary, but most commercial loans take 30–60 days from application to funding.

A strong brokerage team ensures lender communication stays aligned with PSA deadlines to avoid delays.

7. Prepare for Closing

As contingencies are removed and deadlines near, the deal moves toward closing. The title or escrow company coordinates final documentation and prepares the settlement statements.

Typical closing tasks include:

• Finalizing prorations of taxes, rents, utilities, and deposits

• Confirming estoppel certificates (if applicable)

• Completing final walk-throughs

• Reviewing closing disclosures and wiring instructions

• Signing closing documents

• Distributing funds and transferring ownership

  
  

Buyers receive the deed, and sellers receive their proceeds upon closing.Once recorded, the transaction is officially complete.

8. Post-Closing Considerations

Even after the sale closes, there are important follow-up items:

Buyers should:

• Transfer utilities

• Update insurance

• Notify tenants (if acquiring an occupied building)

• Begin property or asset management plans

  
  

Sellers should:

• Retain closing documents for tax reporting

• Confirm payoff of existing loans

• Coordinate any post-closing obligations or prorations

  
  

Strong communication during this period ensures a smooth transition for all parties involved.

Final Thoughts

A commercial real estate sale is a detailed, multi-step process that requires careful planning, clear communication, and expert guidance. Whether you're buying or selling, understanding each stage helps you stay ahead of potential challenges and make confident decisions.

Working with an experienced CRE broker can streamline the process, ensure deadlines are met, and position you for the best possible outcome.

Written by LevRose CRE with assistance from: LevRoseCRE.(2024)

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