Selling Commercial Real Estate with a Business

THE SALE OF A BUSINESS AND REAL ESTATE TYPICALLY REQUIRES THE BUYER OBTAINING FINANCE

Looking to sell your commercial real estate with a business in California?

If you own a business as well as real estate, it may be tempting to simply put the business on the market and worry about valuing and selling the real estate later. The concern with this approach is that it may result in unforeseen problems. These problems can cause delays and unforeseen costs that lead to damage to the business.

To avoid any problems and ensure the successful sale of your business and/or real estate for the right price and terms, it’s important to apply a strong risk management approach. This involves conducting initial research to uncover any potential issues about the real estate such as property conditions, environmental issues, title checks, flood risk, crime overview, and more.

Factors to consider when selling a business with real estate

Commercial property sales with a business in California, especially one that involves the sale of a commercial property, there are many factors to consider. For instance, the sale of the business is typically kept confidential so employees, vendors, customers, and more don’t find out the business is for sale which can lower the value of the business. Additionally, many businesses in different industries require a special license or permit to operate, which can slow down the process of finding a qualified buyer.

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Some other factors to consider include how critical the real estate of a commercial property is to the operation of the business, whether it includes buildings or structures that require repairs or maintenance, and whether any environmental issues or zoning ordinances could affect the sale.

Other considerations include whether the owner has been allocating an amount for rent and whether this amount is a market rate or one that the owner is willing to accept, as well as who will be responsible for property taxes, building insurance, and maintenance after the sale. Finally, conducting an ALTA Land Title Survey and checking whether the property is part of a flood zone can also help ensure a smooth sale.

The sale also typically requires the buyer to obtain third-party finance, often in the form of an SBA loan or commercial loan, which adds to the complexity of the transaction. To ensure that everything is done correctly, the sale typically involves a California escrow company that works through a comprehensive checklist.

To read about Finance when buying Commercial Real Estate, click here.

By taking a thoughtful and thorough approach to commercial property sales with a business in California, you can increase your chances of a successful sale.

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IS RARELY EASY. THE REASONS INCLUDE:

The Sale of Commercial Property with a Business in California

The sale of a business in California, especially with commercial real estate, is rarely easy. The reasons include:

Typically, the sale is kept confidential, so vendors and employees don’t know the business is for sale. This approach to confidentiality protects the business owner from any damaging consequences, especially to the value of the business.
In California, many businesses in different industries need to have a special license or permit to operate that the buyer needs to acquire before they take over the business. This can slow down the process of finding a qualified and motivated buyer.
The sale of a business in California typically requires the buyer to get finance and it’s typically an SBA loan with all its complexities.
The sale typically uses a California escrow company that holds a license with the State of California. This requires the escrow company to navigate a checklist to ensure all is done correctly.

To read about Finance and an SBA loan to buy Commercial Real Estate, click here.

To learn about the different steps during escrow, click here.

HERE ARE SOME OTHER FACTORS TO CONSIDER.

When Selling or Buying Your Business with Real Estate

There is simply no “one size fits all” approach whether selling or buying a business with real estate. Here are some other factors to consider.

Some California business owners that also own the Real Estate, simply prefer to keep the Real Estate and offer a lease to the buyer of the business. If a decision has been made to sell the business, before a final decision is made about whether to also offer the commercial property for sale or not, the following are important items to consider.
How critical is the Real Estate to the operation of the business? For example, if the business is a gas station or a car wash built on the Real Estate the business operates from, it may be hard to sell just the business and offer a lease to a buyer. This is because the business cannot easily and readily be moved
Is the Real Estate just land or does it include buildings or structures on the Real Estate? If it includes buildings or structures, are they in good condition or do they need repairs and maintenance? If repairs and maintenance are required, is the seller willing to pay those costs so the buildings and structures are brought up to date and the latest building code?
The buyer will probably want a lease for the Real Estate. If the buyer wanted a three- or five-year lease with options but only stayed for the initial lease and then left, would the Real Estate owner easily find a replacement tenant? If the buyer is getting an SBA loan, they will require a lease to match the length of the loan which is typically 10 years.
Has the owner or seller of the business been allocating an amount for rent and is this amount a market rate or the amount the owner of the Real Estate is willing to accept as rent? If there is no rent allocation or the rent is below the market rate and the buyer has to pay a higher rent, it will lower the value of the business as expenses are higher.
This also applies if the owner of the business has not been paying the property taxes, building insurance, or maintenance of the Real Estate and now expects the buyer of the business and Real Estate to cover these costs.
Are there any environmental issues on, or near the real state? If so, this may lower the value of the Real Estate and the business.
When was the last time that local zoning ordinances were checked so if the Real Estate is put on the market, it is ‘smooth sailing’ to close the sale?
Related to local zoning ordinances are local Use requirements typically defined at the municipality level.
Is the Real Estate part of a flood zone?

How to Sell a Commercial Property Fast with a Business in California?

Are you looking to sell your commercial property and business in California?
A crucial first step is to get an accurate business valuation.
This is not only important for you as the seller, but also for potential buyers and lenders if the buyer needs financing.

Send free inquiry

FOR MORE INFORMATION CLICK EACH LINK BELOW

Andrew Rogerson; Sacramento, CA

is a business owner of 39+ years. This includes successfully owning and operating 5 businesses. Andrew is a Certified Mergers & Acquisition Professional (CM&AP), Mergers & Acquisition Master Intermediary (M&AMI), Lifetime Certified Business Broker (LCBB), author of 4 books, and he gives speaking presentations on request.

Andrew helps business owners with a business in California, value and sell their business in the Lower Middle Market or with a value from $1m to $50m.

(916) 570-2674

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