The commercial real estate market has been following the residential real estate market down the drain. It has been lagging by 12-18 months but is now in full foreclosure mode!
This will be much bigger than the residential situation we have seen over the past three years. Commercial properties are financed differently than residential. They typically have mortgages on them that balloon (need to be paid off) in 3,7, or 10 years. When these loans come due, they are typically refinanced. In today\’s depreciating market, a lot of these commercial properties will not qualify for refinancing. The economy has prompted businesses to downsize or close putting more pressure on commercial property owners. Often rent reductions are given to attempt to keep tenants. Even with reductions, many businesses are closing their doors. Third thing is there are no government programs to help businesses keep their properties. (unless it is a bank or car manufacture!)
The result is a defaulted mortgage. This creates a situation where the owners of the properties must either pay off the loan, refinance, foreclosure, or short sale the property. Short sales will be a huge method over the next many years. It allows the owner to sell the property at today\’s market value if the bank will allow it.
Short selling the property is often the answer. Short sales will be a huge deal over the next several years. The owners can sell the property at market value and walk from the bad situation. The lenders need to approve these types of deals, but it is often in their best interest to do so.
Investors are buying up these great deals, often leasing them out at reduced rates and still binging in a profit! They can now buy properties for 60-90 percent of value. After the short sale, the properties often will cash flow even at reduced rents. Deal with an investor that has experience in commercial short sales. A regular real estate agent is not always the best way to go. Also do not pay money up front for negotiations. Real investors will typically do the negotiation with their fees being paid by the lender. Be aware that commercial property owners may be held responsible for the amount forgiven for the short sale, and the amount forgiven may be counted as income on their tax return. Commercial property owners should consult their tax and legal teams before proceeding to see how this may impact their tax and financial situation.
Over the next many years, you will see this method used very often to help move the U.S. real estate market back to stability.
Looking to find the best deal on Commercial Short Sales, then visit www.APGShortSales.com to find the best advice on foreclosure alternatives for you.
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