Commercial properties are considered distressed primarily when the owner experiences financial trouble and is unable to pay the mortgage or other debts. However, the “distressed” label also applies to properties that have deteriorating conditions either from poor management or environmental causes. As a result, distressed properties often have below-market occupancy rates, high vacancy rates or have become obsolete, either physically or functionally. In such cases, buyers who are willing to undertake rehabilitating or repositioning the property may find a unique investment opportunity.
When a property’s owner is facing financial difficulties and cannot pay their mortgage but want to avoid a foreclosure, then can sell the property for less than they owe on the mortgage as a “short sale”, with the approval of their lender. The owner sells the property for a reduced amount and the lender forgives the remaining debt.
Sometimes when an owner defaults on their mortgage loan and the lender initiates foreclosure proceedings, that commercial property may be offered for public sale in an auction. A foreclosure auction allows the lender to recoup some of the outstanding mortgage debt and may provide strong opportunities for investors to purchase the property at a discount.
REO (REAL ESTATE OWNED)
When a borrower defaults on their mortgage loan and is unable to sell the property through a short sale or foreclosure auction, ownership is then assumed by the lender. This is referred to as an REO property, or “real estate owned.”
Your Trusted Guide
Distressed properties can be an excellent business opportunity for investors. Coldwell Banker Commercial® affiliated professionals provide the expertise and guidance that both buyers and sellers need in these unique transactions. Professionals specializing in distressed properties can help ensure a successful transaction by identifying risks and opportunities to help you maximize returns, helping with repositioning the property and connecting you with financing lenders. You can rely on a CBC® affiliated professional to act as an advisor who is there to help you navigate the complexities of a distressed property transaction.
Property evaluation – Your CBC affiliated professional can assess the value and condition of the property to determine its marketability.
Due diligence – Our experienced affiliated professionals may gather and review financial and legal documents to ensure the property is suitable for investment.
Property Management – A Coldwell Banker Commercial affiliated professional can assist with the management of the property after sale or lease, including rent collection, property maintenance and tenant relations.
Repositioning – We can help you reposition a property that isn't doing well by identifying potential buyers or tenants, advising on property improvements, and negotiating lease or sale terms.
Financing – Our commercial professionals can connect investors with lenders that specialize in financing distressed properties and assist in the loan application process.