Expert: Mike Fortunato - 10/25/2008

Question
Hello,
My husband and I saw a 1200 sf office condo in Northern Virginia that we would like to buy and use to set up a small pediatric practice. When we met with our brokers (a husband and wife team)to discuss the contract, the man said that the best contract to use in our situation is a standard residential contract, due to the fact that this purchase was very straightforward and the residential contract was much less complicated than the commercial contract. When we questioned the lack of language regarding a 30-day study period, among other things, he said that we did not need to question the fairness of what was a standard, widely-used and accepted boilerplate residential real estate contract. To the contract he did add a sentence that this was a commercial property, and it was also noted in there that the contract was contingent upon us being being approved for financing.  When we said we wanted language in there that said we must agree to the terms of the financing (in other words, if we are only approved for a high interest rate, we want to decline), he said of course that was a given, although not explicitly stated. We told the agent we wanted to investigate further, and he was quite annoyed that we did not sign at that moment, stating that he had done all could do for us. I really do not appreciate his attitude.
I have worked mainly with the wife all this time, and she has showed me close to 20 properties to get to this point where we have found one we like. I like her and feel that she has worked hard for us, and although I dislike her husband, I feel guilty about dumping her when we finally found the right one. (Our written contract with them representing us as our brokers expired months ago, but continued with an implied understanding.) Please let me know your views on our situation in general, and specifically, your views on using a residential contract for a commercial purchase (the the benefits and drawbacks).
Thanks you so very much.
Patti  

Answer
Your first mistake (as you probably know by now) is using a residential broker for a commercial transaction. Quite frankly, it sounds like this is out of her league -- and commercial transactions can be vastly different than residential exchanges. There are reasons that commercial paperwork is much more involved and complicated! There are a myriad of factors that need to be considered in a commercial real estate transaction that are not applicable in buying a home (too many to list here). Suffice it to say, you should definitely use the proper forms and avoid attempts to substitute with something inferior. And, nothing should be left "as a given"....everything should be in writing, especially something as important as the financing contingency that you mentioned in your question.

At this point, I would switch gears and find a commercial broker to represent you, or if you decide to keep your current agent, then you should hire a real estate attorney to prepare/review the paperwork and to negotiate will the seller on your behalf. My strong advice is to NOT go down the path as suggested by the residential broker.

Incidentally, although I'm in California now, I spent most of my life in Northern Virginia, and I believe you are making a wise choice to invest now by buying rather than renting. You'll be glad you did years from now.