Should Commercial Tenants Consider Foreclosed Properties? Part 2

A Snap Shot Of The Foreclosure Process

Before Foreclosure

1. Owner can’t make payments on loan because property is not producing enough income to make the monthly loan payments.
2. Owner and Lender may discuss alternatives for the Owner to stay in control of the property. It is a lifeline that might assist in giving time to the Owner to increase income through lease-up or increased rental rates. Sometimes it works and sometimes it just extends the inevitable.
3. Lender may not extend any resolutions to Owner and Lender will start the foreclosure process immediately. Each lender and property will handle foreclosure differently.
4. Knowing the property is having income problems the Lender might decide to sell the loan or note to an investor at a discount. The investor is usually not interested in being a Lender and will quickly want to take ownership of the property through foreclosure.

During Foreclosure

1. The foreclosure process will be different for each state.
2. The Owner can sometimes put up a long legal battle in which no money will be spent on the property during that time.
3. Attracting new tenants or keeping existing tenants is hard given the unknown future of the property.
   Leasing decisions and property decisions are generally controlled by Lender and will typically take longer to answer.
4. The relationship between Lender and Owner can become tumultuous and nothing will be agreed upon.
5. In some cases the Owner might hand over the keys quickly and the Lender will take control immediately.

After Foreclosure

1. Lender’s will typically take one of two approaches once they receive title of the property: Quick Sale or Lease-Up
2. Quick sale will most likely result in selling property at a discount.
3. Lease-Up will require a longer hold period in order to increase the value of the property through increased revenue by leasing vacant space. Lenders will most likely have to spend money to attract tenants but this option allows. Lenders to recover most or a greater portion of their investment.
4. Investor which purchased the note prior to foreclosure will flip or hold the property. This will be determined by the Investors investment criteria.

Note: Each state will have different foreclosure laws compared to other states. It is advisable to ask a real estate attorney any questions you might have about your state foreclosure laws and how they affect tenants. The above article used general terms which could apply to your state or not.

Take A Test Run On Market Data

Fell free to go to www.leasewithease.net and test our site for selecting office, medical office and retail space.  All you need to do is select “Test” submarket when entering your search criteria.  For more information please go to www.leasewithease.net.

The Move

Need help with preparing for “The Move” then feel free to contact LWE with any questions or if you need a referral for getting your office moved and set up smoothly.

Tenant Vendor List

LeaseWithEase can provide a vendor list to tenants seeking contacts for installing a security system or a contact for a coffee vendor. Also, if your company offers services to office, medical office or retail tenants we would like to include your company in our vendor list for our clients.  Feel free to forward information about your company and what you provide tenants.

Follow us at:

The Tenant Handbook, @LeaseEasy, LinkedIn, Facebook, www.leasewithease.net

Google+

LeaseWithEase Technology, LLC (www.leasewithease.net)

“Bringing The Local Real Estate Market To Your Desk”

Alan Gore

Partner

Texas Broker License #0449773