If I hire a real estate agent, do I need to hire an attorney?

You need an experienced commercial real estate attorney to protect your interests. The Texas Real Estate Commission that governs real estate contracts specifically prohibits real estate agents from giving legal advice, and states in the contract the buyers and sellers sign, “Consult an attorney before signing the contact.” Additionally, brokers don’t get paid unless the sale closes. Attorneys are objective. The attorney’s job is to protect you in the earnest money contract for due diligence and represent you at closing. Hiring an attorney on the front end could save a client from hiring a trial attorney on the back end when there is a serious problem, costing much higher fees.

Does title insurance guarantee perfect title?

No, title insurance is nothing more than an insurance policy that provides good and marketable title to the property being insured. This does not guarantee perfect title. There are many exceptions to title which are disclosed on Schedule B of the preliminary title commitment. This document is usually confusing or just legal mumbo jumbo to most people. Items listed in the title commitment are pre-existing matters on the property that the title company is not insuring which shifts the burden of those problems to the buyer. You are charged with legal notice of theses issues whether they are specifically pointed out to you. Examples of items listed in Schedule B include: easements, restrictions, mineral drilling, boundary disputes, mineral or farm leases, and any defects in title that would have been apparent from obtaining a new survey or otherwise physically inspecting the property.

Should I purchase the property with a company or personally?

There are many issues that can arise with respect to how you take title to property, and especially so in a commercial context. If you take title as an individual, you may be exposing yourself to potential liability exposure for anything, including injuries that occur on the property. In order to avoid those liabilities, it is common for purchasers to form a separate LLC to purchase and own commercial property.

What is a “1031 exchange”?

A “1031 exchange” is a method of deferring tax on the sale of an interest in real property allowed under section 1031 of the Internal Revenue Code. Generally, it allows a seller to defer tax on a capital gain that would otherwise be realized on a sale of property by reinvesting the proceeds from a sale into a like-kind property. The rules for a 1031 exchange can be quite complex and it is easy for a seller to run afoul of them. It’s always advisable to have an experienced CPA and legal counsel involved in the transaction.