Commercial Short Sale
Im currently in contract on a 144-unit property that is pending foreclosure. After analyzing operating statements we capitalized the property to a value less than the debt owed on the property. The debt on the property is at $3.9MM and after capitalizing NOI the property is conservatively at $2.5MM. If the property is turned around and operates at COMPARABLE levels the NOI could be valued at $5.3MM.
The only way for this deal to make sense is to negotiate a short sale on the property with the lender. We have never negotiated a short sale on commercial property before.
Does anybody have experience with these type of negotiations?
What type of dynamics are present?
Will an MAI appraisal be necessary? Lead time is 4-5 wks and we do not have that type of time.
What information will give us bargaining power?
Unless you are going to assume the note and make it current lenders have very little incentive to do that deal-- better to foreclose and get it out of their house altogether.
In order to understand a short sale, also known as short payoffs and pre-foreclosures sales, we must first decribe the meaning of short sale.
A short sale is defined as the negotiation of the transfer of ownership, negotiation of owership of real property with a mortgagee (lender) also known as the beneficary,when the property is financailly over encumbered with monety liens.
These types of sales are usually consummed for a considerable discount thus creating equity which is used to pay off real estate commisions, as well as closing cost, delinquent taxes, code violation fees, child support liens, personal judements, irs tax liens, and other monetary property liens.
You may have to involve a experinced Real Estate professional that knows about these transactions.
[ Edited by commercialking on Date 09/17/2006 ]
Many people look for older mobile home parks to convert into town homes because of the high density given to MHP.
With a good business plan (exit strategy) you should be able to qualify for Hard money to do construction. Town homes share common walls and are likely to be built for a lower price per SF.
Good Luck,
Robert
[addsig]