How to Make Your Short Sale a Success
Short sales are a way for commercial property owners to get out from a rock and an unmanageable loan. While residential real estate is getting under control, the fallout of commercial loans is just beginning. Many short-term commercial loans with five- and seven-year terms are reaching maturity between 2011 and 2013, and commercial foreclosure filings are reaching an all-time high. These statistics are frightening for business owners and investors who have done everything right but are unable to meet financial obligations.
Depreciated property values and record-breaking vacancies are producing high delinquency rates in desirable industrial buildings, office spaces, retail outlets, multi-family apartment buildings and investment properties. When business owners and investors see cash draining away instead of revenue surging in, they have several choices. Commercial borrowers can use their own assets, file for a credit-damaging bankruptcy or begin the short sale process. This is where a short sale specialist with Allied Commercial Real Estate can help.
When Is the Best Time to Begin a Short Sale?
Ideally, commercial property owners should begin the short sale process while they are in pre-foreclosure. This includes properties where the owner is behind on payments, but the lender hasn't filed a Notice of Default. Even if property owners are more than three payments behind and have received a default notice, they are still in pre-foreclosure status. Lenders are motivated to liquidate properties quickly when owners have received these notices. If a property owner can't make payments and can prove ongoing hardship, the bank may agree to forced mitigation, which can speed the short sale process.
Determining an Acceptable Short Sale Value
When a property owner wishes to begin the short sale process, they need to consult a short sale broker. The first step is determining the current property value. Next, a short sale agent will prepare a proposal to submit to the lender. This includes a breakdown of potential foreclosure costs showing a clear advantage in the cost of a short sale. It also includes a letter of hardship detailing the company's current and future status. A professional short sale agent can complete negotiations in 90 days.
Marketing a Commercial Short Sale Property
In order to make any short sale a success, a short sale broker must find qualified buyers quickly. Allied Commercial Real Estate uses a multi-channel approach to locate buyers while the opportunity is available. A commercial short sale broker can seek investors through email marketing campaigns, postcard mailings, building signage, cold-call canvassing and advertisements on syndicated sites that receive 10,000 unique hits per week.
Selling a Short Sale Deal
Short sale specialists are expert negotiators who work as an intermediary between all parties. The secret to successful short sales lies in determining how much the buyer will pay and how low the lender will go. If the buyer is willing to pay $1,000,000 for a property, it's critical that the broker doesn't provide the buyer's all-in offer, or there won't be room to negotiate. A short sale specialist understands that lenders might return with a counteroffer, so this is an important consideration.
Commercial short sales are gaining popularity because they are less damaging to credit than a foreclosure or bankruptcy, and companies can re-enter the real estate market quickly. Small community banks and large financial institutions are equally willing to complete commercial short sales. Although short sales represent a loss, they cost 12 to 20 percent less than foreclosures. Investors and property owners considering a short sale should contact a short sale agent with Allied Commercial Real Estate for more information.
This Article is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal tax and/or legal adviser.