How Much Are Closing Costs on Commercial Properties?

How Much Are Closing Costs on Commercial Properties?

Buying a commercial property feels like a big win. Maybe it’s an office building you’ve had your eye on or an apartment complex you know will cash flow. The numbers make sense, the financing looks solid, and you’re ready to sign. Then the lender or attorney brings up closing costs, and suddenly the deal feels more expensive than you expected.

That’s the part that trips up a lot of investors. Closing costs aren’t pocket change. On a multimillion-dollar deal, they can climb into six figures. If you didn’t budget for them, they can cut into your reserves and even mess with your return projections.

Here’s the thing though, you don’t have to get blindsided. Once you understand what goes into these costs and where the money actually goes, you can prepare for them ahead of time and make smarter decisions.

What Are Closing Costs in Commercial Real Estate?

Closing costs are the extra expenses that come due when the property changes hands. Think of them as the “price of doing business” to get the deal officially across the finish line. You’re paying not just for the building itself, but for all the professionals, paperwork, and legal protections that make sure the transfer is valid and clean.

On residential homes, people usually pay about 2% to 5% of the purchase price in closing costs. Commercial properties tend to be a little steeper, more like 3% to 6%. And percentages don’t tell the whole story. On a $5 million office building, even the low end of 3% means $150,000. That’s real money, and it can hit harder than buyers expect.

Most of the heavy lifting falls on the buyer. You’ll cover things like loan fees, appraisals, legal work, title insurance, and escrow services. Sellers usually pay their broker’s commission and their own attorney. But the split isn’t always black and white. Depending on negotiations, some costs can shift back and forth, which is why it’s smart to lock down who’s paying what before you get too far.

Knowing what you’ll face ahead of time is critical so you don’t get blindsided at the last minute.

Breakdown of Typical Commercial Closing Costs

There are several major fees you should expect in nearly every commercial property deal. Let’s go through them one by one.

Loan Origination Fees

Lenders charge origination fees for reviewing and approving your financing. These usually run 0.5%–1.5% of the loan amount. On a $2 million loan, you’re looking at $10,000–$30,000.

Appraisal Fees

Commercial appraisals are detailed and expensive compared to residential. A lender needs confirmation that the property value matches the loan. Costs usually fall between $3,000 and $10,000, depending on size and complexity.

Legal and Attorney Fees

Commercial real estate requires in-depth legal review. Your attorney handles zoning rules, lease agreements, and liability concerns. A strong legal team can cost anywhere from $5,000 to $20,000.

Title Search and Title Insurance

Before you take ownership, the title must be clear of liens or disputes. The title search and insurance combined usually cost $2,000–$10,000.

Environmental Assessments

Lenders often require a Phase I Environmental Site Assessment to check for contamination. If issues are found, Phase II testing may follow. Expect $3,000–$8,000, but costs can climb much higher with problems.

Survey and Inspection Costs

A land survey confirms exact boundaries. Inspections ensure the building’s structure and systems are sound. Combined, these fees are generally $5,000–$15,000.

Recording and Transfer Taxes

Local and state governments charge for recording deeds and transferring property ownership. The range is wide, but these can easily run into the tens of thousands.

Escrow Fees and Closing Services

Escrow companies handle the exchange of money and documents. Their fees usually fall between $2,000 and $5,000.

Brokerage and Commission Fees

If a broker is involved, commission is typically 4%–6% of the property value, paid by the seller. On a $5 million deal, that’s $200,000–$300,000.

Additional Closing Costs Buyers Often Overlook

Beyond the big-ticket items, there are smaller costs that can sneak up on you.

• Zoning and Land Use Permits: Needed if you plan to redevelop the property.
• HOA or Association Fees: For mixed-use or condo-style properties, unpaid dues may transfer to the buyer.
• Utility Adjustments: Buyers may reimburse sellers for prepaid utilities or services.
• Prorated Taxes and Insurance: Buyers usually cover a portion for the remainder of the year.

Individually, these may seem minor, but together they can add another 1%–2% of the purchase price.

Factors That Influence Commercial Closing Costs

Not every deal looks the same. Here’s what drives the numbers up or down:

• Property Value and Loan Size: Bigger deals come with bigger fees.
• Location: States like New York and California have much higher transfer taxes.
• Type of Financing: SBA loans, bridge loans, and traditional commercial loans all carry different structures. SBA loans may have higher upfront fees but offer long-term savings.
• Deal Complexity: A simple office building is cheaper to close than a multi-tenant retail plaza with zoning issues.

Understanding these factors helps you plan more accurately and negotiate smarter.

How Much Do Closing Costs Add Up To?

On average, commercial closing costs fall between 3% and 6% of the purchase price. Here’s an example for a $2 million deal:

Cost Component	Estimated Range
Loan Origination Fees	$10,000 – $30,000
Appraisal Fees	$3,000 – $10,000
Legal Fees	$5,000 – $20,000
Title Insurance	$2,000 – $10,000
Environmental Assessment	$3,000 – $8,000
Surveys/Inspections	$5,000 – $15,000
Escrow/Recording/Taxes	$5,000 – $25,000+
Total Range	$33,000 – $118,000+

For residential buyers, $10,000 in closing costs may feel huge. For commercial buyers, six figures is often the reality.

Who Pays for What in Commercial Transactions?

In most deals, here’s how costs are divided:

• Buyers cover: loan origination, appraisals, inspections, title insurance, legal, and escrow.
• Sellers cover: broker commissions, their own legal fees, and often transfer taxes.
• Shared or negotiable: property taxes, utilities, and association fees.

Always get these details in writing. Don’t assume the seller will cover something just because “that’s how it’s usually done.”

Strategies to Manage and Reduce Closing Costs

Closing costs are unavoidable, but you can take steps to keep them manageable.

1. Shop Around: Get multiple quotes for attorneys, title companies, and inspections.
2. Negotiate: Ask the seller to share costs if your offer is strong.
3. Consider a Bridge Loan: Bridge loans can help you close faster and sometimes roll certain fees into financing.
4. Bundle Services: Some companies offer packages that lower the combined total.

The goal isn’t to cut corners. It’s to avoid draining cash unnecessarily.

Closing Costs in Special Situations

Not every transaction is standard. Some unique cases affect costs differently:

• Distressed Properties: Expect extra inspections and legal review.
• 1031 Exchanges: Some fees can be deducted from exchange proceeds.
• Large-Scale Developments: Costs rise due to zoning changes and environmental impact reviews.
• Small Retail or Office Buildings: Still include most fees, but at smaller amounts

Knowing where your deal fits helps you budget better and avoid last-minute surprises.

FAQs About Commercial Closing Costs

How much should I expect to pay in closing costs?

Most buyers pay 3%–6% of the purchase price. On larger deals, this adds up fast.

Can closing costs be financed?

Yes. Many lenders allow you to roll some costs into your loan, lowering your upfront out-of-pocket.

How long does closing usually take?

Commercial closings typically run 60–90 days, though complicated deals can take longer.

Are closing costs tax deductible?

Some are. For example, loan interest and certain taxes may qualify. Always confirm with a tax professional or review .

Do bridge loans have higher or lower closing costs?

Bridge loans often carry slightly higher fees, but they allow faster closings and can save deals from falling apart.

Conclusion

Closing costs aren’t something extra you pay on the side, they’re part of the deal itself. And yes, they can get expensive. On most commercial properties you’re looking at a few percent of the price, sometimes more if the deal is tricky or the property is in a high-cost area.

The key is to know about them early, not the night before closing. If you set money aside and factor them into your plan, they won’t throw you off or eat into your returns.

That’s where we can help. At RTI Bridge Loans, we work with California investors to set up financing that already accounts for closing costs. If you’ve got a deal coming up, reach out to us at (562) 857-2285 and we’ll help you get it closed without surprises.