What Costs Should Buyers and Sellers Expect Beyond the Purchase Price?

When buying or selling commercial real estate, the purchase price is only part of the financial picture. Both buyers and sellers should plan for additional costs that arise throughout the transaction—from due diligence to closing.

Understanding these expenses upfront helps avoid surprises, protect cash flow, and keep deals on track.

Below is a breakdown of the most common costs buyers and sellers should expect beyond the purchase price.

Costs Buyers Should Expect

1. Earnest Money Deposit

Buyers typically submit an earnest money deposit once a Purchase & Sale Agreement (PSA) is executed.

• Often 1%–3% of the purchase price

• Held in escrow

• May become non-refundable after due diligence

  
  

2. Due Diligence Costs

During the inspection period, buyers are responsible for investigating the property’s condition and financial performance.

Common due diligence expenses include:

• Property inspections (roof, HVAC, structure, systems)

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

• Survey

• Lease audits and financial review

These costs vary by asset type but are generally non-refundable, even if the deal does not close.

3. Financing & Lending Fees (If Applicable)

For financed purchases, buyers should budget for:

• Loan application and origination fees

• Appraisal

• Lender-required environmental reports

• Legal review and underwriting fees

Financing-related costs can range from 1%–3% of the loan amount.

4. Closing Costs & Prorations

Buyers often pay:

• Title insurance (buyer’s policy)

• Escrow or closing fees

• Recording fees

• Prorated property taxes, utilities, and rents

• Tenant security deposits (if acquiring an occupied property)

  
  

5. Post-Closing Expenses

After closing, buyers may incur:

• Immediate repairs or capital improvements

• Insurance premiums

• Property management setup costs

• Utility transfers and operational expenses

  
  

Costs Sellers Should Expect

1. Brokerage Commissions

Seller-paid brokerage commissions are typically negotiated upfront and paid at closing.This is often the largest seller expense outside of loan payoffs.

2. Legal & Transaction Costs

Sellers may be responsible for:

• Attorney review of the PSA and closing documents

• Escrow or title fees (depending on local custom)

• Costs related to estoppel certificates or payoff statements

  
  

3. Property Preparation & Due Diligence Support

To support the buyer’s due diligence process, sellers may incur:

• Maintenance or repairs

• Document preparation

• Environmental or engineering reports (if pre-ordered)

  
  

4. Payoff & Closing Adjustments

At closing, sellers may need to cover:

• Loan payoff fees or prepayment penalties

• Prorated property taxes and utilities

• Tenant credits or negotiated repair concessions

Costs That May Be Negotiable

Some transaction costs can be negotiated during the LOI or PSA stage, including:

• Allocation of title and escrow fees

• Responsibility for certain reports

• Repair credits or price adjustments

• Proration structures

This is where experienced brokerage representation plays a critical role in protecting your financial position.

Final Thoughts

A successful commercial real estate transaction requires more than agreeing on a purchase price. Buyers and sellers should understand all associated costs to plan effectively, avoid surprises, and move through the transaction with confidence.

Partnering with an experienced commercial real estate broker helps ensure costs are identified early, negotiated properly, and managed efficiently from start to close.

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

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