Thankfully I have not been asked this question. Not yet anyway. I know that every property owner in town wants to be an expert at this type of thing, but gaining the experience is painful. Most owners will avoid the pain if they can. But having been through the process before I feel I can shed at least a little light on a dark and somewhat obscure subject. Commercial Short Sales.
There are a couple of things one needs to know when selling short a property. First, one needs to determine who is loosing money. If approached properly, this is a choice, not a mandate. When a property owner finds himself in a position of default on his loan, the lender may call for the asset to be sold. In better times, these assets were sold at a gain, everyone wins in this situation. The defaulting mortgagee has a financial monkey off his back and the mortgagor has his cash. In down markets, like 2008 and 2009, these assets are sold at a loss. This is called selling a property short, or short selling. This short sale type scenario is still preferential to the mortgagor, especially today, because mortgagors are short on liquid capital to lend. That liquid capital will come from the sale of the asset. Sometimes mortgagors will take a loss so that they can get their hands on the capital. Don't get me wrong, they will ding the mortgagee's credit rating, but it will not be as detrimental a ding as a foreclosure.
The real winners in this scenario are the buyers. Buying short sale property is sometimes tricky, it is especially difficult in the commercial real estate side, as there are less short sales, and usually banks have stash of investors ready to purchase commercial short sales at a moments notice. I would argue that most commercial short sales do not even make it to the open market. The trick to finding commercial short sale deals is to have a connection with the marketplace.
Do you have a property that is in distress? Want to try selling short, but not sure what will happen? Or do you just have general commercial real estate questions? Let me know.
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Commercial Real Estate Short Sales
Posted by Brandon Koplin in arizona, commercial short sales, real estateThankfully I have not been asked this question. Not yet anyway. I know that every property owner in town wants to be an expert at this type of thing, but gaining the experience is painful. Most owners will avoid the pain if they can. But having been through the process before I feel I can shed at least a little light on a dark and somewhat obscure subject. Commercial Short Sales.
There are a couple of things one needs to know when selling short a property. First, one needs to determine who is loosing money. If approached properly, this is a choice, not a mandate. When a property owner finds himself in a position of default on his loan, the lender may call for the asset to be sold. In better times, these assets were sold at a gain, everyone wins in this situation. The defaulting mortgagee has a financial monkey off his back and the mortgagor has his cash. In down markets, like 2008 and 2009, these assets are sold at a loss. This is called selling a property short, or short selling. This short sale type scenario is still preferential to the mortgagor, especially today, because mortgagors are short on liquid capital to lend. That liquid capital will come from the sale of the asset. Sometimes mortgagors will take a loss so that they can get their hands on the capital. Don't get me wrong, they will ding the mortgagee's credit rating, but it will not be as detrimental a ding as a foreclosure.
The real winners in this scenario are the buyers. Buying short sale property is sometimes tricky, it is especially difficult in the commercial real estate side, as there are less short sales, and usually banks have stash of investors ready to purchase commercial short sales at a moments notice. I would argue that most commercial short sales do not even make it to the open market. The trick to finding commercial short sale deals is to have a connection with the marketplace.
Do you have a property that is in distress? Want to try selling short, but not sure what will happen? Or do you just have general commercial real estate questions? Let me know.
I am interested in learning more about what Blue Engine means and how it relates to real estate. It reminds me of Thomas the Tank Engine to be quit honest.