To see the main difference between residential and commercial real estate closings, you first need to look to the use of each of the properties. Generally speaking a commercial piece of real estate is going to be used by some form of business entity whether that property is being leased or owned by the business. Commercial properties for the most part are used to make some type of profit as well. There are many different types of commercial real estate such as: warehouses; industrial buildings; hotels; restaurants; shopping centers and malls; medical facilities; most types of office building and storage facilities.
In contrast to commercial, a residential piece of property is used as a living space. There are a wide variety of different types of residential real estate such as: a single family home; a multi family home; a townhouse; and condominiums. When referring to apartments, condominiums, or townhomes, they are only a residential closing when the closing consists of four units or less. If the closing involves five units or more, then it would generally be considered a commercial real estate closing.
In general, residential real estate closings are more simple and regulated. Commercial real estate closings tend to be more complex and often have more parties involved in the transactions than a residential real estate closing. Residential real estate closings in Alabama are regulated by the Real Estate Settlement Procedures Act. This is a federal law that governs residential real estate transactions. This act was created to reduce costs for buyers and sellers and make the real estate transaction process more transparent and efficient for both parties involved. This act applies to all residential closing that involves a federally regulated mortgage.
Commercial real estate closings are not regulated by the Real Estate Settlement Procedures Act. Since commercial real estate closings are much more complex than residential real estate closings, they require more time and due diligence from all of the parties involved. Commercial real estate closings must comply with all of the zoning requirements in the city and state that the property is located in. There is also a very complex contract that is included in a commercial real estate closing. This contract should be drafted by an experienced real estate attorney.
Another main difference between a commercial real estate closing and a residential real estate closing is the different parties that are involved in each. With a residential real estate closing, there is a buyer and seller, then the title company and the lender. The buyer and seller usually have an Alabama family law attorney. However, in a commercial real estate closing, there are more parties involved in the transaction. Generally you will have the officers and board members of the company involved along with attorneys on each side.