How Long Does Closing Take Once My Hotel For Sale Goes Under Contract?
Closing is the actual settlement and transfer of the title from seller to buyer according to the sales contract. The buyer receives the title to the hotel and the seller receives the money. There are numerous requirements and costs that make this a very intricate process.
If your hotel for sale is a mid-sized, mid-tier, limited service, franchised property, closing on a hotel for sale will most likely take 90 days. However, due to the complex nature of the hotel sales closing process, there are many factors that can extend or shorten this timeframe.
The Closing Process for a Hotel for Sale
You may already know that the duration of steps that it takes to close a real estate transaction is known as escrow. Just before escrow closes, the buyer and the seller will both receive a closing statement. This document lists the purchase price and all of the expenses associated with the acquisition of the hotel for sale, along with information about how those expenses will be allocated between the buyer and the seller.
Many of these expenses will have already been paid outside of closing (POC) directly to the service providers as well as other expenses involved with closing. Having the expenses listed on one statement helps keep records for quick and easy referencing when the hotel is sold.
Most sales contracts allow for buyers to make a final inspection and do a walk-through to inspect the hotel property for sale before closing. Use this as an opportunity to make sure that the hotel has been maintained, that the agreed upon repairs have been made, and that no other unplanned changes or alterations have been made to the hotel for sale. Both the seller and buyer should closely inspect the closing statement to know their own contractual responsibilities.
A survey is also typically conducted to make the precise boundaries of the hotel property for sale clear. This provides a layout of the building(s) and significant landmarks and will also show any encroachment from or to adjoining properties.
The seller will need to obtain a payoff statement for any and all liens that lists the amount needed for the property as of the day of closing, including principal, interest, any prepayment penalties and the fee for issuing a certificate of satisfaction. These pre-closing procedures, from surveys to title certificates and mortgage information, all ensure that everything is in order.
The complications that a seller or buyer could run into to obtain the necessary statements and certificates could potentially slow the closing process. Alternatively, the absence of need for some of these procedures (i.e. no mortgage or liens on the hotel for sale) could speed up the process.
There are a lot of things that must be in order to close on a hotel for sale and it is a meticulous and complicated process. It’s crucial that both the buyer and the seller do their part in taking the steps and providing the documents needed for the progression of the sale.
Here at Southeast International Hotel Brokers, we are experienced and knowledgeable, and we will walk you through this process and make it as easy on you as possible.