Whether the purchase involves residential or commercial real estate, the mindset should be the same: Buyer beware. Because most real estate transactions are entered into at arm’s length, it is important for potential purchasers to condition the sale on what they believe the property “is” so they can be allowed out of the transaction if the property turns out differently during the due diligence stage of the transaction. This is especially true when purchasing commercial real estate. The property is more than the physical structure. The value of the property also depends upon the revenue stream generated presently and potentially in the future from the property.
A recent decision handed down by the U.S. District Court for the Eastern District of Pennsylvania in The Herrick Group & Associates LLC v. K.J.T. L.P. only reinforces why it is so critical for potential purchasers to include language in their agreements of sale permitting them to remove themselves from the transaction prior to closing without penalty if the property does not turn out the way it was represented to them.
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