Why Commercial Inspection is a critical process of any Escrow Process in San Diego
Did you know that the average price of a commercial property in San Diego is $612 per square foot with a median cap rate of 5%? Also, over the last 12 months, the San Diego industrial market saw a $909 million in sales volume. All of these numbers are quite evidence that the real estate market in San Diego is thriving, and rightly so. The city has so much to offer for businesses, from a diverse economy and skilled workforce to a wide range of audiences and clientele to serve. So, if you are thinking of investing in San Diego, there’s no point in holding your horses.
However, one significant step that you must add to the property-buying process is asking for a commercial inspection. This inspection is very thorough in analyzing the property’s true condition and identifying potential issues that might impact the value or functionality of your commercial property. Also, remember that San Diego is a seller’s market. So, there’s always a high demand for every property, but it’s on you not to get influenced by that. The seller, one way or another, might be able to sell their property, but it’s you who will be risking their investment and a hefty amount of money by skipping inspections.
One of the other reasons to get your commercial inspection done is that it is a “recommended” part of the escrow process in San Diego. If you’re new to this term, then we understand your confusion, but there’s no rocket science there. In fact, in this blog we will explain it all to you.
What is the escrow process?
The escrow process is one of the most suitable ways to make sure that everything goes well and smoothly in your real estate transaction. The process involves a neutral third party known as an escrow agent. They hold the funds, documents, and other assets on behalf of you and the seller till the conditions of the agreement are met.
For the escrow process to begin, you and the seller need to agree on the terms of the transactions and sign a purchase agreement. Once this is done, you can deposit the money (funds) into an escrow account while the seller provides the necessary documents and fulfills any agreed-upon conditions, such as property repairs or inspections. Here, you need to ensure that you have mutually decided with the seller to conduct a commercial inspection before finalizing the deal.
After this, the escrow agent ensures that all the terms of the contract are satisfied before releasing the funds to the seller and the property title to you. This whole process is preferred to ensure security, transparency, fairness, mitigating risks, and protecting the involved parties from fraud or disputes.
The time needed to complete an escrow process varies depending on different factors like:
- Complexity of the transaction
- Financing (the sooner you secure the funds, the sooner the process might end)
- Inspection and repairs
- Document preparation and review
- Contingencies
However, on average, the escrow process might take between 30 to 60 days.
Why Do You Need Commercial Inspection During Escrow Process?
Due Diligence
Commercial inspection is the best way to ensure that the property you’re buying is worth it. Often, property buyers get blinded by the potential market for their business. But what they don’t realize is that the biggest asset they’re investing in could be their biggest loss – yes, we’re talking about the property. So, it’s better to be sure about what you’re stepping in because to get the best Return on Investment, you must ensure that the investment is good. The commercial inspections help you identify the potential issues with the property, such as:
- Structural problems
- Environmental concerns
- Code violations
- Major system issues
If the issues are major then you will get an idea whether you shall continue with the purchase, negotiate the price, ask for repairs, etc.
Lender Requirements
Let’s be real, there is a high chance that you’re financing the purchase through a loan, no harm in that. However, there is also a fair chance that your lender might ask you to get the property inspected. Again, the reason is obvious – to ensure that the property’s condition meets their standards and protects their investment. If the property doesn’t suit them or if they suspect it to be a red flag, then they might also not lend you money.
Negotiation Tool
Almost every buyer tries to negotiate the asking price with the seller, but without any solid reason, it gets quite difficult. Most of the time, the found issues through commercial inspections help you in this regard. Depending on the extent of damage found, you can ask the seller to decrease the purchase price or request repairs or concessions.
Risk Mitigation
While it might seem like the commercial inspections are for buyers only, it’s not true. When it comes to mitigating the risks, the buyers and sellers both can benefit from these inspections. As a buyer, you can avoid unexpected repair costs after you have purchased the property. While the sellers can address the issues with the property upfront, which saves them from future disputes with the interested buyers.
Standard Practice
In competitive markets like San Diego, conducting commercial inspections has become a standard practice. These inspections help in providing transparency and peace of mind to all parties involved in the transaction.
Conclusion
To remind you, know that a commercial inspection is not a necessity for the escrow process, but it is a recommended step that’s better to not miss. With inspections in place, the buyers and sellers can get the needed protection and assurance by acknowledging the uncovered potential issues that could affect the property’s value and functionality. Most of all, these help in making informed decisions and deciding whether one should move forward with the purchase or not. And if you are a buyer, it helps you in updating your property to the best condition to secure potential buyers.
Besides this, in a dynamic and competitive real estate market like San Diego, ensuring that a commercial property meets all necessary standards before finalizing a transaction mitigates risks and fosters transparency. By getting thorough commercial inspections into the escrow process, you can confidently move forward, secure in the knowledge that your investment is sound and interests are safeguarded.
Ensure your next commercial property investment is secure and sound with Elite Commercial Inspections. Our expert team provides comprehensive evaluations to uncover potential issues, protecting your investment and giving you peace of mind. Don’t leave your property purchase to chance—contact Elite Commercial Inspections today for a thorough and reliable inspection. Schedule your inspection now and make your next move with confidence!
