Tomāto or Tomăto - Real Estate Documents Simplified
There is a lot of paperwork in a real estate transaction. As a real estate broker, I have access to over 250 forms in the CAR library and close to another 90 in the AIR commercial library. These are most of the forms we need for a transaction, but we have a few more we use on a daily basis.
It is not always clear what the document contains based on the name when we receive it from other brokers. We like nomenclature, acronyms and giving documents obscure names as well as borrowing names of documents from other industries.
Here are a few commonly used documents in the commercial real estate arena that may not be so common to you:
Memorandum or offering memorandum (OM) - Used for marketing real estate investments and is provided to a potential buyer. Usually, contains all pertinent information of an investment property to give the buyer a well-rounded picture.
Executive summary, marketing brochure, flyer, presentation or opportunity - used interchangeably along with the OM. A broker’s marketing material could range from a simple one-page flyer to a detailed package including financial information for an investment property.
Letter of intent (LOI), offer to purchase or offer to lease - These documents are usually non-binding agreements that allow an interested buyer or tenant layout their desired terms of a purchase agreement or lease. It is a summary document of the major terms of an offer that can be negotiated back and forth before the actual purchase agreement or lease is drafted. This usually helps alleviate paperwork and help the process go smoother.
Request for proposal (RFP) - Very similar to the LOI, but is used by a tenant, for example, to give to a prospective landlord or several if shopping around. The RFP states the tenant's needs and provides information about the tenant and their credit-worthiness and asks for the landlord to name the terms for a prospective lease.
Confidentiality agreement (CA) or non-disclosure agreement (NDA) - Used often for properties that may include a business or tenant. When a property is marketed, a property owner may not want their financial information or tenant lease readily available to the public. Likewise, a business owner like a winery would not want the public to know their business and real estate is for sale. Oftentimes the initial public marketing will be obscure in the naming of a property or be limited to basic information until a CA or NDA is signed by the buyer and their broker, which legally binds them from sharing the information.
Annual property operating data (APOD), financials or property statements - In some form usually are the financial statements for a real estate investment property. Statements are usually annual and include several different metrics. The APOD can show the current operating information as well as a five or ten-year forecast.
Offer, purchase contract or purchase agreement - All, or some rendition thereof, represent the contract used in purchasing real estate.
Transmittal - A simple letter or memo used to summarize long agreements such as a lease or purchase agreement.
Burt M. Polson, CCIM, is a local real estate broker specializing in commercial, luxury estates and wineries. Reach him at 707-254-8000, firstname.lastname@example.org. Sign up for his email newsletter at BurtPolson.com.