What are the Closing Costs Associated with Buying Commercial Real Estate in Philadelphia?

Hands using a calculator and jotting down notes in a notebook beside a laptop and glasses on a wooden table, meticulously calculating the finer points related to property line disputes.

Closing Costs Associated with Buying Commercial Real Estate in Philadelphia

If you are looking to purchase commercial real estate in Philadelphia, one major consideration is determining the closing costs you will incur. As an experienced commercial real estate lawyer in Philadelphia, I regularly help buyers understand and navigate this important process.

RS Law Group has helped businesses navigate commercial real estate for decades in Philadelphia. Contact us now at 215-717-2200 or email us at co*****@********up.com to speak with our experienced team of commercial real estate attorneys. 

A document titled "Closing Costs" rests on a desk alongside a pen, keys, folders, and notes on property line disputes.

Why Closing Costs Matter for Commercial Real Estate

Closing costs might not seem as exciting as finding the perfect commercial space, but they are crucial to factor into your overall budget. These various fees, taxes and other charges typically range from 3-5% of the total purchase price. For a $1 million property, that could mean $30,000-$50,000 in closing costs alone.

Being caught unprepared can derail an otherwise solid deal. By understanding closing costs in Philadelphia, you can plan accordingly and avoid any unwelcome surprises down the road.

Key Closing Costs for Commercial Real Estate in Philadelphia

As an experienced commercial real estate attorney in Philadelphia, I have helped numerous investors and business owners buy commercial real estate while optimizing their closing costs.

Here are some of the main closing costs to keep in mind:

Title Insurance Fees

Title insurance protects against claims against your ownership interest in the property. It comes in two forms:

  • Lender’s policy – Insures the lender against issues with your title

  • Owner’s policy – Insures you as the property owner

In Philadelphia, total title insurance fees often reach around $5 per $1,000 of coverage.

Legal Fees

An experienced commercial real estate lawyer in Philadelphia can save you major headaches when buying commercial real estate by reviewing all contracts, negotiating favorable terms for you, and facilitating closing. Attorneys typically charge $300-$500 per hour.

Recording & Transfer Taxes

In Philadelphia, these include:

  • Deed transfer tax – 3% of the sale price

  • Mortgage recording tax – 3.278% of the mortgage amount

So for a $1 million property with a $700,000 mortgage, total transfer taxes would equal around $43,500.

Inspections & Surveys

Thoroughly inspecting a commercial property provides critical insights before you commit. Specialized commercial inspections range from $1,000-$5,000 depending on the property size and scope.

Lender Fees

If financing your purchase, lender fees vary but often include 1-2 points of the loan amount. Each point equals 1% of the loan amount.

Who Pays Closing Costs on Commercial Real Estate?

Closing cost responsibilities depend on what is negotiated between the buyer and seller. There are three main arrangements:

  1. Buyer pays all – Most straightforward but costliest option for buyer

  2. Seller pays all – Rarest scenario as sellers look to maximize sale price

  3. Split costs – Most common compromise approach

As an experienced commercial real estate attorney in Philadelphia, I can help you negotiate the best closing cost outcome so you retain more capital for your business.

Tips for Optimizing Your Closing Costs

As a leading Philadelphia commercial real estate law firm, RS Law Group regularly advises clients on minimizing closing costs without sacrificing legal protection. Here are our top tips:

Shop Around for Title Insurance

Rates can vary dramatically, so compare several providers. Prioritizing price over coverage can cause issues later though.

Negotiate with Lenders

If financing, try negotiating lender fees or asking them to cover third-party appraisal costs. Offering a slightly higher interest rate can provide more leverage.

Seek Property Tax Abatements

Philadelphia offers tax abatements for improvements made to commercial buildings that can save considerable long-term tax expenses.

Frequently Asked Questions

1. How much are typical closing costs on commercial real estate in Philadelphia?

In Philadelphia, closing costs on commercial real estate typically range from 3-5% of the purchase price. Exact costs depend on various factors like property type, purchase price, chosen lender and more.

It depends on negotiations, but buyers often pay around 60% of the total closing costs, with sellers picking up the other 40% as a concession to help finalize the sale.

Yes, closing costs incurred while purchasing a commercial property used for business purposes qualify as tax-deductible expenses. An experienced commercial real estate lawyer can provide more detailed tax guidance.

The party who pays depends on negotiations, but it is common practice for buyers to cover owner’s title insurance while sellers often pick up lender’s title insurance costs.

Absolutely – an experienced commercial real estate attorney is invaluable for reviewing contracts, facilitating negotiations, navigating regulations, and handling closing. Their fees almost always provide a positive ROI through better terms and avoided issues.

Hire an Experienced Commercial Real Estate Attorney

A commercial real estate lawyer in Philadelphia can help negotiate favorable closing cost terms with sellers. Their fees pay for themselves many times over.

As a top-rated Philadelphia commercial real estate law firm, RS Law Group has the experience to optimize your purchase while avoiding costly surprises.

RS Law Group has helped businesses navigate commercial real estate for decades in Philadelphia. Contact us now at 215-717-2200 or email us at co*****@********up.com to speak with our experienced team of commercial real estate attorneys.

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