There are foreclosure deals happening in commercial properties

People who are wondering whether to invest in real estate should think twice. There are some foreclosure deals happening in commercial real estate. There are many real estate properties that have been foreclosed by banks. The banks have not sold them yet but are instead leasing the properties.

Take, for instance, David Hogan. The vice president of Commercial Lending at Patriots Bank is a mid-sized bank. It had taken over a retail center in Johns Creek. David wants tenants for the property. It does not want to sell it. The bank will sell the property only after prices have inched up from the rock-bottom level.

“All the banks are taking haircuts (losses) now, but in stages,” David says. “Most banks don’t have the capital to absorb sizable losses all at once, so they are holding onto their commercial real estate to stagger the losses.” This is particularly so in cases of small banks which are unable to absorb losses from palming off depressed commercial properties.

David is also of the opinion that properties are being sold off in bulk. “It seems that these properties are mostly being sold in large bulk,” David says “Individual investors are finding it hard to compete.”

In certain areas, however, individual investors are gaining. The Federal Government had come up with Small Business Administration (SBA) loan program. Cone Maddox, an employee of Dargan/Whitington & Maddox of Atlanta, says that, “Banks are trying to hold out long enough to recoup their losses.”

The firm has seen booms and busts. “Our current downturn is the worst for Atlanta that I’ve seen. But I’ve learned that things are never as good in the good times as you think they are, and never as bad in the bad times as you think, either,” he says.

Experts are, however, of the opinion that the situation will improve only after the employment scenario improves. At present, the unemployment level is a high of 11 per cent. Therefore, those people even with very sound credit history are faltering on mortgage payments.

Whereas earlier, it was those with who had taken sub prime mortgages, now it is the unemployed middle class who form the largest group of defaulters. It may also be noted that foreclosures are very high in certain regions like California, Arizona and Nevada. Foreclosures are at a very high level here and it may take a while for the real estate market to recover.

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