Real estate transactions vary with the type and classification of a given property. Here are the main differences between residential and commercial conveyancing in the DMV area.
Differences between residential and commercial transactions
Conveyancing refers to the process of transferring property from one owner to the next. It covers a set of administrative and legal processes to ensure the smooth transfer of ownership. It entails the preparation, verification, and execution of various legal documents.
The process involves a licensed conveyancer or conveyancing solicitor who is trained and qualified to carry out the necessary work on your behalf, ensuring that the sale is lawful and valid. They will investigate the title to the property, conduct a title search, and provide professional and unbiased legal advice on title transfers.
The main difference between residential and commercial conveyancing has to do with the type of property being sold and its intended use. Residential conveyancing is done for homes or dwelling units while commercial conveyancing involves offices, retail space, warehouses, and other similar properties.
Aside from property type, the main difference has to do with property usage and whether it is being acquired for business or personal use. Commercial buyers are often looking to buy or sell property on which to run a business. They may also be looking to lease the property to business owners for a profit. Residential conveyancing involves buyers who are personally engaged in finding a permanent or vacation home.
Key differences in property type
-
Commercial real estate refers to a broad category of properties that are used for non-residential purposes. Local zoning laws determine the kind of business activities that can be conducted in certain areas. Some examples of commercial real estate include shopping centers, restaurants, offices, hotels, storage facilities, and sports and events venues.
-
Residential real estate is developed for shelter and housing. Some examples include single-family homes, townhomes, condos, apartment buildings, co-ops, vacation homes, trailer parks, and residential lots.
Key differences in real estate protections and loans
If you’re buying a home, there are guidelines and legal protections in place to protect your interests. The Real Estate Settlement & Procedures Act (RESPA) requires mortgage brokers, lenders, servicers, and settlement parties to offer timely and accurate disclosures regarding the residential real estate settlement process. It prohibits kickbacks and other unlawful practices, and offers guidelines on the proper use of escrow accounts. These disclosures and guidelines will help you make the best possible decisions during the homebuying process.
However, the act only applies to specific types of loans – RESPA doesn’t cover the vast majority of commercial real estate transactions and construction-only loans, which include commercial properties, vacant land, and large land tracts. This means that the parties involved in a commercial real estate settlement will have to negotiate the structure of the deal and closing documents involved.
For this reason, commercial real estate settlements require more due diligence and in-depth investigations by independent, third-party companies. Due diligence may involve a Property Condition Report, Zoning Report, Environmental Site Assessment, and more depending on the nature of the property and transaction.
Key differences in ownership
Most commercial conveyancing processes involve leasehold properties in which the tenant must pay rent to a lessor or landlord. When handling a commercial lease, a conveyancer will investigate the title before a deal can be finalized. Residential conveyancers deal with both leasehold and freehold properties, the latter of which grants the buyer rights to the property or ownership of the title for a certain period of time.
Key differences in title insurance
The main difference with commercial title insurance is that the provider must be absolutely certain that the land being purchased is zoned for commercial development and that it can lawfully be used for commercial purposes. A given property may not necessarily be zoned for specific commercial use even if it is located in a commercialized area.
Key differences in escrow and recording
Both residential and commercial conveyancing require settlement agencies to hold escrow. The main difference is that commercial real estate transactions typically involve larger amounts of money coming from multiple sources. This makes them more complex than residential real estate transactions.
The recording process is similar for both residential and commercial conveyancing as the transfer of ownership involves a publicly recorded deed. A home purchase may entail a warranty deed while a commercial real estate deal usually involves a quitclaim or special warranty deed.
The Advantage of Working With a Title and Escrow Company
Choosing a company that offers both residential and commercial settlement services will make it more convenient to view all of your real estate investments from a single vantage point. It also allows you to take a more organized and cost-effective approach to acquiring different types of real estate and ensuring that all transactions are settled properly.
Work With Integrity Title & Escrow Company Today
Integrity Title & Escrow Company facilitates residential and commercial real estate transactions in Maryland, Virginia, and Washington D.C. Contact us at 410.581.6861 or send us a message to get started.