Buying Commercial Foreclosures Part 3 – alternative markets
If you’ve been following this series of posts, you have probably noticed that a lot of my writing on this topic is focused on getting ahead of the competition. In this post the focus will be on getting away from the competition all together, by taking advantage of markets that most buyer’s aren’t even aware of.
Buying from the wholesaler:
When it comes to larger commercial properties, most banks will either have a department that handles the sale of such an asset, or they will have a dedicated asset management company that will take care of all marketing and sales activity for the property. However this is not always the case when it comes to smaller properties, such as small multifamily properties (5-10 units) and small retail/commercial buildings.
Bulk REO Deals
When a lender decides to liquidate smaller properties, many times they will just unload them to what we call a bulk REO purchaser at a much discounted price. Since the lender is able to unload up to several thousand units in one transaction, they save a lot of time and money that would be spent if they tried to sell them one at a time. Once this transaction is over, the bulk REO purchaser will typically turn around and sell the units in smaller groups to investors, or individually on the open market. When selling the units in groups to investors, the properties will typically be sold for an amount over what the purchaser paid for them, but still below actual market value. If you are looking to pick up multiple properties below market value, this can be a great way to do it.
Be the Lender
With all the REOs on the market, sometimes it’s easy to forget that most financial institutions really don’t want to be in the business of selling real estate. The truth is that banks/lenders would much rather dedicate their resources to originating new loans, rather than having to deal with the processes and expenses involved in foreclosing on properties and trying to sell them as REOs. One way banks/lenders resolve this problem is by selling off their troubled notes (loans) before they have to begin the foreclosure process.
When a bank/lender sells off their troubled loans, they will normally do so for pennies on the dollar. Although most large lenders sell off these troubled notes in bulk (1,000 or more at a time), smaller lenders (or credit unions) will sell their troubled notes in much smaller batches to local investors (maybe 10 or less at a time). If you are not interested or unable to by in batches, by getting involved with the local exchange groups in your area you may be able to purchase these notes individually from the individual investors.
I recommend extreme caution when purchasing through an exchange group. In many cases by the time it has gotten down to the exchange group, any profit to be made has already be absorbed throughout the previous purchases. In addition, you will want to verify whether or not the note you are purchasing is in primary position against the property. This can be accomplished by utilizing a title company. If you have a preferred real estate agent, they should already be teamed up with a local title company in order to accommodate you.
Be Aware: Purchasing a loan may carry more risk than property. You will want to be sure to do your research, and be aware of what all is required of you in order to carry out the potential foreclosure on your new loan.
Related Posts:
Buying Commercial Foreclosures Part 1: Understanding the Bank’s Position
Buying Commercial Foreclosures Part 2: Researching Properties
Commercial Real Estate: Alternative Financing
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
Legal disclaimer : I am not an attorney or tax professional. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal or tax advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.
About The Author
Hello, Please keep this up! The more we can educate consumers
about foreclosures, the sooner the market will turn the corner.