The Difference between Commercial and Residential Real Estate

Real estates concept are not the same. Not all real estate sales are the same. As such, each one has its own factors to consider. This is especially true when comparing residential real estate sales with commercial real estate. While both involve the transfer of properties from one entity to another, this is where the similarity ends. It is important to understand the difference between these two so that certain pitfalls, such as improper real estate title insurance, can be avoided.

Residential Real Estate

In residential real estate, a property is purchased for the use of an individual or a family, generally for the purpose of providing living arrangements. Since the sale is so personal, there are a lot of factors that must be considered. Is the buyer looking for a secondary or vacation home? Do they want to build a home from the ground up? Are they a real estate investor looking to refurbish and resell a foreclosure, short sale or distressed home?
The insurance requirements on a residential purchase depend on its use. Will it be a multi-family structure such as a duplex or apartment building? If it involves too many units, it may actually fall under commercial rules, as below. Will the buyer be living in the house? These are some of the many factors to consider.

Commercial Real Estate

Commercial real estate, on the other hand, involves the purchase of properties strictly for investment or business use. If you are purchasing a building out of which you plan to run a small business, for example, this is commercial use. If you want to create an industrial facility, host office space, develop the property or engage in a similar venture, you are dealing with commercial real estate.
Commercial real estate can even cross over with residential, if you plan to lease the property to a tenant who will live there. While laws differ from state to state, in general if the property you are purchasing will have more than four residential units, you are purchasing a commercial property.

What Agents Do

Residential agents guide buyers through the process of purchasing their new home or selling their old one. They help with paperwork, deal with the seller and the seller’s agent and help to explain such issues as mortgages, hand money, down payments, home inspections and the legalities of purchase. They often have contacts among title insurance companies, inspectors and other important people along the process of buying and selling a home.
Commercial real estate agents are experts in the representation of tenants and client business. This includes the leasing of building space and the terms and laws involved therein, investment opportunities, return on investment and capitalization, and the kinds of real estate title insurance that must be held by the owners of such properties.
The biggest differences are the laws which surround commercial and residential properties, and the expertise held by the agents representing clients. If you are purchasing a new property in Florida, be it residential or commercial, we can guide you through the process of buying title insurance. For more information, take a look at an overview of our services, and email us at [email protected] or call us at (305) 901-5628 today.