Differences Between Buying A Home And A Commercial Property

9 November 2015
 Categories: Real Estate, Blog


Many small business owners who are looking to buy their own commercial property for the first time are already familiar with the home buying process. While there are some similarities, it's important to understand a few key differences between buying a home and buying a commercial property.

Zoning Laws

Just because a business used to be able to operate on a property doesn't mean your business will be able to operate there. Commercial zoning laws are very complex, and only certain business types may be allowed in a given zone.

When buying a commercial property, you need to have a commercial real estate lawyer investigate the applicable zoning restrictions. Never rely on a seller who may be mistaken as to the zoning laws even if they're not intentionally trying to mislead you. Similarly, just because a specific type of business operated on the property in the past doesn't mean it was or currently is approved.

If you're uncertain of the zoning laws or find out you need to file for special approval, one option you have it to make the purchase contingent on zoning being approved by the local authorities.

Consumer Protections

Home buyers have protections for things like termites, asbestos, faulty roofs, and other hazards. Depending on local laws, a buyer may be able to unwind the sale if these types of problems are discovered after the purchase and couldn't have reasonably been discovered before the purchase.

In a commercial sale, there are no consumer protections. It is strictly let the buyer beware. You must conduct your own independent, thorough investigation using your own inspectors or risk being stuck with what you bought.

Getting Financing

Applying for a mortgage requires a lot of paperwork, but it's a relatively straightforward process. Prove you have enough income to afford the home, pledge the home as backing for the loan, and get approved. If you don't pay, the bank takes your home and sues you for any remaining shortfall.

Commercial financing isn't so easy because a new business location may not have easily proven sales numbers to show that the business can afford a loan. Other problems arise when a business is a corporation or LLC and the bank wouldn't be able to go after the business owner's personal assets in the event of a default.

If you're a small business owner, be prepared to provide detailed financial statements and be aware of the possibility that a lender may want you to pledge your personal assets to back the loan.

To learn more, contact a commercial property real estate broker at http://sgcityrealestate.com/ today.