The Closing Process and Title Insurance: Residential vs. Commercial Real Estate Transactions

A multi-story office building set against a blue sky backdrop.

Whether they’re residential or commercial focused, there’s one thing every real estate agent looks forward to: closing day. However, depending upon which segment of the industry they work in, there are a number of differences between exactly how to navigate closing day—and applying for title insurance.

In this blog, we’re going to cover some of the main differences between closing on a residential home and closing on a commercial property. Have any questions about your upcoming transaction, and whether or not you’ll need a commercial title insurance plan? Don’t hesitate to give us a call.

Now, let’s dive right in.

Operational Differences: Paperwork and Multiple Parties

One of the biggest differences between residential and commercial real estate closings is the technical side of the process. Purchasing a home to live in is relatively straightforward: it usually involves a buyer, a seller, and their respective real estate agents. The buyer applies for a mortgage loan through a bank, supplying all the necessary paperwork and information, and prepares a down payment for the seller. After the loan is approved, a professional agency will perform a title search for the property, and finalize the buyer’s title insurance policy.

While this is happening, a sales contract is written and approved by the seller and their agent. Once the down payment and the loan finish processing, the title of the home is transferred to the lender, the buyer pays all the closing costs and receives the keys to their new home.

Commercial transactions, on the other hand, are more complicated as they often require many different parties—not just a buyer and a seller. This can make the closing process more challenging, as everything must be approved by every stakeholder.

Logistical Differences: Tenants

Similarly, commercial properties are often multi-family properties—meaning you may also be taking on tenants.

In order to transfer ownership of a commercial property that serves as an apartment complex, the buyer will have to assume any residential leases held by the tenants. If this is the case, additional paperwork for and from the tenants may also be required.

Legal Differences: Laws that Regulate Real Estate Closings

There are a number of laws that regulate exactly how a real estate closing process happens—and how much it costs. Oftentimes, commercial real estate closings are less regulated than residential properties. As a result, these closings may be more complex because they are not as closely monitored by the law. Due to their price differences and complexities, they often require more expensive closing costs as well.

This is just one example. In order to understand the many complexities involved with the closing process and the law, you’ll want to talk to your real estate agent or a professional title insurance agency.

Title Insurance Made Easier

Buying a commercial or residential property? Tryon Title Insurance is here to help. We’re a highly qualified title insurance agency with experience in every one of North Carolina’s 100 counties. Our underwriters are well-versed in both residential and commercial transactions.

If you’re looking for a title search, rely on Tryon Title for excellence.