The Difference Between a Residential and Commercial Corporate Escrow Company in AZ

Buying or selling real estate property can be an overwhelming process. Often, not understanding the steps involved can lead to frustration among both parties. Today we’re discussing some of the differences between a residential and commercial corporate escrow company in AZ.

There are more parties involved in commercial transactions.  Residential sales transactions typically include at most, two purchasers and two sellers. However, a commercial transaction can include many more parties because these acquisitions tend to be much larger financial investments.

Even if there is only one legal entity buying or selling the property, there are usually several individuals behind the scenes who are vital to the decision-making process of each particular commercial real estate deal.

Commercial transactions are more time-consuming. Multiple factors result in longer closings when dealing with a commercial corporate escrow company in AZ. Namely, commercial sales require additional legal stipulations, which can result in longer closing times than residential transactions. Title searches and other title-related due diligence may also require additional time.

There are higher risks involved with commercial transactions. There are much higher risks associated with commercial real estate transactions. While some buyers may have business plans for their residential purchases, more often than not consumers purchase homes to live in them. Consequently, there are lower risks associated with residential real estate transactions than commercial purchases.

Unlike residential real estate transactions that involve individuals, transactions handled by a commercial corporate escrow company in AZ occur between legal entities. Another key difference is that even if a commercial deal goes bad, investors in a legal entity can protect their personal assets, as they typically benefit from limited liability.

There are different legal requirements involved.  The residential home sales are governed by the Real Estate Settlement Procedures Act. This law regulates how residential real estate closings are conducted and it protects a purchaser by reducing the risk associated with buying residential property. This law only applies to residential real estate transactions.

There is more due diligence involved. Since the Real Estate Settlement Procedures Act doesn’t apply to commercial transactions, they require the purchaser to perform a substantial amount of due diligence. Accordingly, more time is spent researching not just the title of the property, but also the parties to the transactions.

Further, since there are no legal conditions dictating the structure of the sale agreement, each sales agreement is different, and they’re typically complex. The higher levels of risk and investment involved – along with the lack of legislative protection – result in the need for far more due diligence in commercial transactions.

There is no doubt that a commercial real estate transaction is far more complicated and time-consuming than purchasing a home. We have experience in both! If you need an experienced residential or commercial corporate escrow company in AZ, call our office today to schedule a consultation.  We’ll be happy to walk you through all the steps of your transaction.