1. Long Escrow Period- Banks and Lenders who are selling their properties do not want to "spin their wheels". Sellers want the property off of their books immediately. A reasonable escrow period for this type of transaction is 30-45 days, with a due diligence period of 15-20 days. Make your offer using these timelines and you will have more success closing the deal.
2. Financing- Most lenders will not want to finance the sale of their commercial REO properties. Government regulators are watching closely to make sure that no bad loans are made, which usually results in no loans being made. If you can have financing lined up from an outside source or pay cash for the property you will have a higher probability of making the deal.
3. Contingencies- Most lenders do not know very much about their properties, they prefer to sell properties "AS-IS". Make your offer an "as-is" offer and you will have greater success at getting the offer accepted. Use your 15-20 days of due diligence to identify if the property has material or capital intensive repairs to be made.
4. Credibility- If you have a track record of buying distressed properties then you will have credibility with lenders when making offers to purchase their commercial REO properties. If you do no have a track record of owning or buying commercial properties then you need someone with credibility on your team, usually a good broker, advisor or consultant will get the job done. The goal is to not look like an amateur then making an offer, lenders will not take you seriously.
5. Timeline- make sure your offer has a "drop-dead-date" which is a date when the offer is no longer valid or date when the offer becomes void. This drop dead date protects the buyer from the Seller procuring higher bids from other buyers and it forces the Seller to respond quickly in a time frame that you establish upfront.
Written by: Brandon Koplin- Strategic Commercial Realty Senior Sales and Lease Advisor bkoplin@scraz.com.
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5 Things People do Wrong When Purchasing Commercial Bank Owned Property
Posted by Brandon Koplin in 5 Things People do Wrong When Purchasing Commercial Bank Owned Property1. Long Escrow Period- Banks and Lenders who are selling their properties do not want to "spin their wheels". Sellers want the property off of their books immediately. A reasonable escrow period for this type of transaction is 30-45 days, with a due diligence period of 15-20 days. Make your offer using these timelines and you will have more success closing the deal.
2. Financing- Most lenders will not want to finance the sale of their commercial REO properties. Government regulators are watching closely to make sure that no bad loans are made, which usually results in no loans being made. If you can have financing lined up from an outside source or pay cash for the property you will have a higher probability of making the deal.
3. Contingencies- Most lenders do not know very much about their properties, they prefer to sell properties "AS-IS". Make your offer an "as-is" offer and you will have greater success at getting the offer accepted. Use your 15-20 days of due diligence to identify if the property has material or capital intensive repairs to be made.
4. Credibility- If you have a track record of buying distressed properties then you will have credibility with lenders when making offers to purchase their commercial REO properties. If you do no have a track record of owning or buying commercial properties then you need someone with credibility on your team, usually a good broker, advisor or consultant will get the job done. The goal is to not look like an amateur then making an offer, lenders will not take you seriously.
5. Timeline- make sure your offer has a "drop-dead-date" which is a date when the offer is no longer valid or date when the offer becomes void. This drop dead date protects the buyer from the Seller procuring higher bids from other buyers and it forces the Seller to respond quickly in a time frame that you establish upfront.
Written by: Brandon Koplin- Strategic Commercial Realty Senior Sales and Lease Advisor bkoplin@scraz.com.
