We’ll Be Seeing A Lot More Of Commercial Short Sales

First it was the residential real estate collapse. Now comes the commercial real estate collapse! Commercial has lagged behind residential by 12 to 18 months, but is now here. Commercial foreclosures are all over now.

Commercial distressed properties will overtake residential in the coming year or two. There is a lot more money involved in these properties. Commercial is financed differently than residential. Typically, they have short term 3,7, or 10 year loans on them that need to be refinanced at the end of the term. The problem is the values have dropped 10-50% so it is very difficult to get a loan on them. Many businesses have had greatly reduced revenue which has caused them to downsize or close which put even more pressure on the building owner. Sometimes rent reductions are given to try to keep tenant in the property and in business. Even with this, many companies are closing the doors. Also, the government bailouts have not reached most businesses. (except banks and car manufactures!)

If the owners cannot refinance or pay off the mortgage, the owners may try to hang on, but foreclosure is often the outcome.

Investors are gearing up to tackle this huge opportunity. They can now buy properties for 60 to 90 percent of value. At these rates, often the properties will now cash flow even at reduced rents. Make sure you deal with an investor that has experience in commercial short sales. Also do not pay money up front for negotiations. Legitimate investors will typically do the negotiation with their fees being paid by the lender.

Commercial property owners may be held responsible for the difference amount forgiven for the short sale, and the amount forgiven may be required to act as income on their tax return. Commercial property owners should contact their tax and legal teams before continuing to see how this may impact their overall tax and financial situation.

This method over most others will help the U.S. commercial market regain its stability over the next 3 to 5 years.

Learn more about Commercial Short Sales. Stop by Daniel Wolkoff’s site where you can find out all about foreclosure alternatives and what it can do for you.

categories: Commercial Short Sales