If you’re looking to expand your investment portfolio or find a commercial space to launch or expand your business, you’re going to do everything you can to ensure you choose the right commercial location. During this process, many people end up focusing on things they want, like an ideal location, a turn-key establishment or something in the perfect price range, but they don’t always pay as much attention to issues that could cause major concerns for their financial investment. When it comes to buying commercial property, knowing what to look out for is just as important as knowing what you want in a commercial space. In today’s blog, we highlight some potential red flags about a property that you may run into during a commercial inspection.
Commercial Inspection Red Flags
Once you have an accepted offer on a property, you will enter the due diligence phase of the deal. This period gives the buyer time to conduct necessary inspections on the property and gives the seller time to address any issues that could cause the deal to fall through. One review that should always occur during due diligence is a commercial inspection.
This inspection is typically performed by a licensed professional who has a better understanding of some of the issues that could cause problems for a property down the road. They’ll highlight these issues in an inspection report, which will contain red flag issues or minor cosmetic notes. Let’s explore some of the red flags that could be highlighted in a commercial inspection report that should cause you to think twice before following through with closing.
- Structural Integrity Issues - A commercial property is only as good as its bones. There are a number of issues that can suggest an issue with a structure’s foundation. Cracks, uneven flooring or bowed walls can all suggest that a foundation is struggling beneath the surface. Structural repairs are oftentimes the most costly repairs that need to be performed, and leaving them unaddressed can be incredibly dangerous. If these aren’t discovered during your inspection, the problem may become your mess after closing.
- Plumbing Problems - Plumbing issues can leave another type of mess on a buyer’s hands. Piping systems from decades ago may have corroded over time, leading to leaks, water pressure concerns, water damage or blockages. Any commercial inspection should include scoping of sewer lines and pressure testing to ensure everything looks normal and is up to code.
- Faulty Wiring - Another issue hiding behind your walls are electrical problems. The electrical system should be a focal point of a commercial inspection, especially if the commercial space plans to use a fair amount of energy as required to operate the business. If legacy electrical systems and outdated wiring suggests that the property is actually a fire hazard, these electrical concerns will need to be rectified prior to closing.
- Environmental Concerns - A thorough inspection will also involve examining a property for environmental issues. Besides looking for potential issues like mold or asbestos, a commercial inspection may also involve soil and water testing to see if these areas have been contaminated by previous commercial operations.
- Title Problems - A final issue that could grind a sale to a halt is a problem with a commercial property’s title. You need to know that the property you are buying is free from encumbrances that could cloud the title and call your ownership into question. Your commercial title services team will perform this inspection, and we’ll work to uncover any potential threats to the property’s title. We can help clear these issues ahead of time and set you up with a title insurance policy to provide you with decades of protection once you complete the sale.
Don’t let a major issue cripple your financial future. Know what red flags to watch for and be sure they are addressed long before you close on a property. For more information, or for help with commercial title issues, connect with the team at Commercial Partners today at (612) 337-2470.