Commercial real estate closing costs
Closing on a commercial property costs more than a home sale because of transfer taxes on a bigger price and the due diligence a buyer and lender need: survey, environmental report, zoning and title endorsements. Here is each line, who usually pays it, and what Florida and Texas charge.
The line items
- Deed transfer or stamp tax
- Seller, usually
- Owner's title insurance
- Negotiated, often seller
- Lender's title policy and endorsements
- Buyer
- Closing (settlement) and escrow fee
- Negotiated
- ALTA/NSPS land title survey
- Buyer, usually
- Phase I environmental site assessment
- Buyer
- Zoning report, property condition report
- Buyer
- Appraisal, loan origination, lender's legal fees
- Buyer (borrower)
- Mortgage taxes and recording
- Buyer (borrower)
- Prorations: property tax, rents, CAM, deposits
- Split by closing date
Commercial contracts are negotiated line by line, so treat the column on the right as a starting point, not a rule. Tenant estoppel certificates and subordination agreements (SNDAs) are also common when the property has tenants, and a 1031 exchange adds a qualified intermediary's fee.
Florida
Florida charges documentary stamp tax on the deed of $0.70 per $100 of the price (Fla. Stat. 201.02). In Miami-Dade County it is $0.60 per $100 plus a $0.45 per $100 surtax on property other than a single-family home, so $1.05 per $100 on most commercial deals (Fla. Stat. 201.031). With a loan, the borrower pays $0.35 per $100 in stamp tax on the note (Fla. Stat. 201.08) and a 0.2% intangible tax on the mortgage (Fla. Stat. 199.133). Title insurance premiums are promulgated by the Florida Office of Insurance Regulation, so the base premium is the same at every title company. Title in Florida.
Texas
Texas has no real estate transfer tax. Title insurance premiums, including for commercial policies, are promulgated by the Texas Department of Insurance, so the base premium does not change from one title company to the next; endorsements are priced from the same rate manual. Title in Texas.
Michigan, Ohio, Illinois and Indiana
Beycome Title also closes in Michigan, Ohio, Illinois and Indiana. Each state page lists its transfer taxes.
Questions
What are typical closing costs on commercial real estate?
They are the same building blocks as a home sale, plus due diligence: transfer or stamp taxes, title insurance and endorsements, the closing fee, recording fees, an ALTA/NSPS survey, a Phase I environmental report, a zoning report, appraisal and lender fees, and prorations of rents, taxes and operating costs. The total depends heavily on the state, the price and the loan.
Who pays closing costs on a commercial property?
Everything is negotiable in a commercial contract. Often the seller pays the deed transfer tax and the owner's title policy, and the buyer pays for its own due diligence (survey, environmental, zoning), the lender's policy and the loan costs, but the purchase agreement decides each line.
How much is the transfer tax on commercial property in Florida?
Florida charges documentary stamp tax on the deed of $0.70 per $100 of the price (Fla. Stat. 201.02). In Miami-Dade County the rate is $0.60 per $100 plus a $0.45 per $100 surtax on property other than a single-family home, or $1.05 per $100 in total (Fla. Stat. 201.031). A mortgage adds $0.35 per $100 in stamp tax on the note and a 0.2% intangible tax.
Does Texas have a transfer tax on commercial property?
No. Texas has no state or county real estate transfer tax, for commercial or residential property. Title insurance premiums are promulgated by the Texas Department of Insurance, so the base premium is the same at every title company.
Beycome Title quotes commercial closings deal by deal. Book a 15-minute call or submit your contract. More terms: ALTA survey, endorsement, closing costs, documentary stamps.