What Commercial Buyers Should Know Before Making an Offer

Commercial real estate does not run on the residential playbook. There is no promulgated contract waiting to be filled in, no standard option period, and often no listing price that means anything. The buyers who do well in commercial transactions arrive prepared – with their analysis, their financing, and their team assembled – before they put a number in front of a seller. Here is what that preparation looks like.

Value is the income, so underwrite the income

A commercial property’s value rests on its net operating income and the capitalization rate buyers in that market apply to it. Before offering, reconstruct the NOI yourself rather than accepting the marketing package: actual rent rolls, actual leases with their expiration dates and escalations, real operating expenses, and market-rate assumptions for anything vacant. Sellers’ pro formas habitually show market rents the building has never achieved and expenses no owner has ever paid. Your offer should be built on the building’s demonstrated performance, with any upside priced as your profit for capturing it – not the seller’s for describing it.

Read the leases before you price the building

In commercial property, the leases are the asset. A building full of tenants matters less than what those leases actually say: remaining term, renewal options and at what rates, who pays taxes, insurance, and maintenance, co-tenancy clauses in retail, early termination rights, and the credit quality behind each signature. Two identical buildings with different rent rolls are different investments. Lease review this deep usually happens in due diligence, but the major terms – anchor tenant expirations especially – belong in your analysis before you set a price.

The letter of intent comes first

Most commercial deals begin with a letter of intent: a short, mostly non-binding document setting out price, earnest money, due diligence period, closing timeline, and key conditions before attorneys draft the full contract. Treat the LOI seriously even though it is not binding – it sets the negotiating baseline, and terms you concede casually in the LOI are difficult to recover in the contract. Negotiate the due diligence period, access rights, and exclusivity there, not just the price.

Financing is negotiated, so start it early

Commercial loans are underwritten deal by deal: expect meaningful down payments, debt service coverage requirements, shorter maturities with balloons or resets, and lender scrutiny of both the property and you. Banks, credit unions, SBA programs for owner-occupants, and private lenders all price differently. Have a lender conversation before you offer – your realistic loan terms determine what price you can pay, and a seller weighing offers will favor the buyer whose financing story is specific over the one whose story is optimistic.

Plan the due diligence you are buying time for

Your offer should secure enough due diligence time to actually complete the work: property condition assessment, Phase I environmental site assessment, survey, title and zoning review, lease and estoppel review, and financial verification. Environmental deserves special respect – contamination liability can attach to owners regardless of fault, which is why lenders require the Phase I and why buyers should want it even when lenders do not ask.

Zoning and use are your problem, not the seller’s

A property being sold as a restaurant does not guarantee you can operate a restaurant there. Verify current zoning, permitted and conditional uses, parking requirements, signage rights, and any grandfathered nonconformities that may not survive a change in use or ownership. If your plans require rezoning or permits, price the time and the uncertainty – approval processes are measured in months and are never guaranteed.

Assemble the team before the deal

A commercial purchase runs on specialists: an agent who transacts in this asset class, a real estate attorney, a lender, an inspector or engineering firm, an environmental consultant, and an accountant for entity and tax structure. Buyers who assemble the team after going under contract compress every professional’s work into a due diligence window that was already short. The team costs the same either way; early, it prevents mistakes instead of documenting them.

Work with an agent who has done this before

Commercial sellers take prepared buyers seriously and negotiate accordingly. Pure Broker is built around experienced agents who already know how these transactions actually work. Find an agent who fits your situation.