Commercial Shortsale?

Property is county appraised at $934k. There is an existing loan for $975k. There are a couple liens for another $21k + back taxes for the last 2 years.

My bank estimates its value at $1.8M and will lend $1.5M.

2/3 of the building is unfinished; the other 1/3 is a non-running but fully equipped restaurant about 3 years old. The property owner is an older lady; she wants to just be done with this headache.

My plan is to purchase property, open restaurant (I am an experienced restaurateur) sell the restaurant business after it becomes established. I plan on using a portion of the loan to finish and lease out the remaining 2/3 of the building.

So that's my plan, I called one of the lien holders and he told me that to get the lien paid he is certainly willing to negotiate. I know I can make money without discounting the loan but I would feel bad if I didn’t at least try. I attempted to call the bank today but nobody knew what loss mitigation was.

I want to hear from people who have completed a commercial short sale before and anyone else who wants me to hear there advice. What other names does loss mitigation go by?

Thanks in advance,

Jcattin

If the seller is not behind in payments, you will have a tough time negotiating a short sale. It's not impossible, just much more difficult. Remeber, most lenders don't lend more than 70% LTV on commercial, so they probably will feel strongly that they have a good chance of recapturing all of their investment. If the bank doesn't know what loss mitigation is, they must be a pretty small local bank. If this is the case, ask for the bank president.

What if the owner was to quit claim the property to me?

A business person today recommended this option to me.

I have heard the term before and I think I understand what it means but I wanted to get the forums opinion and insight.


[ Edited by jcattin on Date 04/22/2008 ]

A quit claim will transfer title, but will not release any leins against the property. The current owner will not own the property but will still owe the bank. Then you will own a property that someone else is responsible to pay the loan on. Bad idea for you and the seller. A quit claim is really only good for transferring it to a company that you own or to take a spouse on or off the title.

[ Edited by stdavid on Date 04/23/2008 ]

I see, my plan is to get a new loan. I know payments have been missed and are not currently being made.

This being the case I just want the opportunity to negotiate the $21k in liens and I want whatever discounts I receive to benefit myself not the owner. I want the owner to payoff the loan and the back taxes with the $1M.

Can the property be transferred with existing liens?

It CAN legally be transferred with existing leins, but you will not be able to get title insurance with ecisting leins. Therefore, your bank will not loan the money. So essentially, no. Not unless you are paying cash and are foolish enough to not want title insurance.

If the existing liens are willing to subordinate to you're new first, you could do that.

As for contacting the bank, it a copy of the actual NOD (if one has been filed) and it should have a bank or trustee's contact info,

How does one subordinate a lien?

get the lien holder to sign a subordination agreement.