A commercial real estate contract is a summary of all the negotiated terms and conditions of an agreement to transfer ownership in a property from seller to buyer. A good contract ensures the satisfaction of both parties. What follows is a guide to understanding how contracts are used in a commercial real estate transaction.

Answers to 3 Questions About Commercial Real Estate Contracts

What is a letter of intent?

A letter of intent is a preliminary agreement between parties in a real estate transaction that outlines the essential terms of a proposed contract. Think of it as the foundation for reaching a formal commercial real estate contract. Letters of intent are usually not binding, but they do facilitate negotiations by setting into motion the good faith estimates of the buyer and seller. 

How is an offer proposed?

The offer to buy or sell commercial real estate must include the address of the property and any other identifying information, including the purchase price, time of closing, and special conditions, such as a time frame for accepting the offer. The only person that can accept an offer is the person who receives the offer. If, for example, the person to whom an offer is made dies during the contract negotiation, the offer terminates. It cannot be extended to any other party. 

How is an offer accepted?

Once an offer is received, it must be accepted for the commercial real estate transaction to continue. Acceptance of the offer includes agreeing to all the terms and conditions outlined in the offer. If any changes are made to the original offer during an acceptance, a new instrument—a counteroffer—is created. Once an offer or counteroffer is accepted, it becomes a legally binding contract. 

If you’re looking to buy, sell, lease, or invest in commercial real estate in the Cincinnati area, contact KW Commercial, of Florence, KY. The firm’s knowledgeable agents are industry leaders and have the expertise and drive to broker real estate transactions that exceed client expectations. Visit their website to browse available properties, or call (859) 359-6805 today to discuss your commercial real estate needs.