In many European countries, signing a purchase agreement for a property must be accompanied by a 10% cash deposit. If you back out for any reason, you lose that money.
What?!!! Yes — that’s how it works in several markets.
While not every country operates this way, the U.S. commercial real estate process is refreshingly different:
- You sign a purchase agreement
- You place a much smaller Earnest Money (EM) deposit, typically around 1%
- This deposit is held in escrow by a neutral title company, not paid to the seller
- You’re usually granted a 30-day Feasibility Period (longer for vacant land), during which you can walk away
- If you terminate the deal during this period, you typically receive most or all of your deposit back
- Some states (like Texas) allow the seller to keep a small portion, often just 1% of the EM
This structure significantly reduces risk for the buyer, allowing you to fully evaluate the property before committing.
Who You Can Hire During the Feasibility Period:
- Building Inspector – Checks code compliance and identifies major issues
- HVAC Inspector – Tests heating/cooling systems and recommends repairs
- Roof Inspector – Assesses the condition and identifies leaks
- General Contractor – Estimates renovation or build-out costs
- Drone Photographer – Great for large sites or remote plots
- Civil Engineer / Architect – Ideal for land purchases to advise on zoning, design, drainage, fire safety, etc.
These inspections cost money, but compared to your total investment, it’s a small price to pay for confidence and clarity.
If you decide not to proceed, you can cancel before the Feasibility Period ends, recover your Earnest Money, and only be out the inspection costs.
Why U.S. CRE Makes Sense
This process makes investing in U.S. commercial real estate a comfortable, low-risk decision for experienced investors. You get time to assess the deal thoroughly, and you’re not locked in financially until much later.
Because of these protections, you can also move fast on a good deal. If something promising hits the market, “paper” it fast sign the contract, secure your place, and then use the next 30 days to decide if it truly fits your strategy.
In contrast, in markets where 10% down is immediately non-refundable, such flexibility is unthinkable.
This is exactly why I love investing in U.S. commercial property.
Let’s talk about your next deal — contact me today.
Lance Langenhoven
Head of Commercial Lending
[email protected]
Frequently Asked Questions
Q1: Why is U.S. commercial real estate considered low risk?
A: Because buyers typically pay only ~1% deposit, get a feasibility period to inspect the property, and have strong legal protections limiting upfront risk.
Q2: What is an “earnest money” deposit, and how much is it?
A: It’s a small initial deposit (often ~1%) held in escrow when you sign a contract, much lower than in many other countries.
Q3: What is a “feasibility period” and why does it matter?
A: A typical ~30-day window during which you can carry out inspections and cancel without losing your deposit, giving you time to assess and limit risk.
Q4: How does this process compare to commercial real estate markets abroad?
A: In many foreign markets, you might put down ~10% deposit upfront and cannot walk away, whereas in the U.S., you get more flexibility and less initial exposure.
Q5: What practical steps should an investor take when buying U.S. commercial property?
A: Use the feasibility period wisely: hire building/roof/HVAC inspectors, contractors, and engineers to assess costs and condition, before committing fully.
