Short Sale?

Short Sale?

As commercial property prices in the area have declined about 30% over the past 5 years many property owners are wondering what they should do when they want to sell.  Chances are if you’ve purchased a property in the last 7 or 8 years it may be worth less than what you paid for it.
 
Recently I have spoken to a couple property owners whose incomes were down and they couldn’t keep making their payments.  They were considering letting the bank foreclose on the property as they did not know anything else that could be done.  In my experience, this should only be done as a last resort when all other avenues have been explored first.
 
The first thing to do would be to call your lender and see if they can modify your loan to something that makes your payment more affordable.  It might be a temporary interest rate adjustment or suspension of principal payments for a certain period of time.  In one case I know a bank offered the client a steep discount on the amount owed if they paid off the loan in cash.  They were able to refinance with another bank and cut their payment in half!
 
If the lender is not able to work something out that enables an owner to continue making acceptable payments, another option to consider is a short sale.  The first step to doing a short sale is calling a realtor who has been through this process and knows the ins and outs.  Essentially the goal is to sell the property at today’s market value and have the bank accept that amount as payment on the loan.  Often times it is not the full amount owed (thus the “short” in short sale).  Depending on the bank and the seller’s financial situation sometimes the proceeds of the sale will completely fulfill the seller’s obligation.  Other times the bank will ask for additional funds at closing or an unsecured note to continue being paid. 
 
While none of these are ideal situations, it is important to note that they will not effect your credit as negatively as a foreclosure.  A short sale is looked upon much more favorably by lenders when it comes to financing your next property.  As always, getting good advice and knowing all your options will get you the best possible outcome in a difficult situation. 

-Dan Stiebel, CCIM

Dan Stiebel

Dan Stiebel

Associate Broker
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