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08-06-2009, 12:46 PM #1
Renter
- Join Date
- Aug 2009
- Location
- Chicago
- Posts
- 2
Short Sale Commercial Property
am a real estate broker in Chicago, IL. Can anyone provide any sound advice on successfully negotiating a short sale on a commercial property. What types of challanges should I be ready for that do not occur in residential short sales? Is an attorney required? What types of discounts are banks usually willing to give on such a transaction? What type of time frame should myself and the client be prepared for? Any advice is greatly appreciated!
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09-30-2011, 08:26 AM #2
Fixer Upper
- Join Date
- Aug 2011
- Posts
- 50
When entering into a short sale transaction it is always best to consult with a knowledgeable attorney. In the case of a commercial short sale, if a tenant occupies the property you want to review the terms of the existing lease. Also you will want to review the rental history to ensure that the tenants are paying on time. It is rare to see a short sale in the commercial market because the tenants generally cover the mortgage payment. Prior to making the purchase I would recommend that you dig into the financials of the current tenants and also review the expenses of the property careful. There are two reasons why a commercial property will go into short sale, the tenant rent is not enough to cover the mortgage (which can be attributed to rental rates that are too low, tenants that don’t pay rent, or an unoccupied space) or the expenses of the property are too high.
The best way to determine the discount that the bank is willing to accept would be to try to estimate the banks costs of holding onto the property. Generally in this market you see discounts of 10%-25% but it will vary depending on the local market. Submit an offer to the bank and be prepared to negotiate a price that you are comfortable with. As with any short sale there is no time limit to how long the bank can take to respond to an offer. Depending on how eager the bank is to sell the property it could be anywhere from a couple of weeks to a couple of months. In order to give your client the best estimate contact the bank that holds the mortgage to the property.
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