Commercial Property Pre-Foreclosure -- How to Approach?

Question

So, I specialize in working with pre-foreclosures, and while 99% of Notice of Defaults are residential properties, every now and then a commercial property comes along.

Auto sales, office building, restaurant... you name it, I've seen it.

But, usually it isn't the name of the business that's in default, it's the property address.

EXAMPLE: 9337 HORTON ST LLC / NINETY THREE THIRTY SEVEN  HORTON ST LLC

Which makes me think that it's the building owner that's in default, not the actual business that is operating out of the building.

(But perhaps the business operating out of the location is failing too, and that's why the building owner is in default!)

Was wondering if anyone might have any experience in capitalizing on this sort of scenario. Reach out to building owner and offer to buy it / sell it?

Eric Odum · Answer

Maybe, if you don't understand how to value a property, you should team up.  Commercial loans are considerably different than residential.  Usually, buildings with paying tenants are not under duress unless the loan is up for renewal and for whatever reason, the borrower or property have issues that would prevent or limit a lender from continuing the loan.  Commercial loans can be easier to deal as an investor when in the foreclosure process, b/c often times the loans are portfolio loans at a local bank.  You can talk to the borrower and talk to the lender (if you work the angle of buying the note).  In residential, most of the time the property is handled by an asset manager that is near impossible to communicate with.  I have done deals on foreclosing properties both with the banker (buying the note) and the borrower (buying the property).  It can be just as simple as asking the borrower if they are interested in selling...frequently they will spill the beans as to what is going on and reasons for the situation might not be what you think it should be...or what might appear logical.  The lender might be anxious to sell the note as the relationship with the borrower has broken down and they want to purge.  Lots of angles here.  Figure out what you think it is worth as a property and as a note and make the calls.

Wes Blackwell · Answer

@Eric Odum,

I know that the owner isn't likely to be the occupant, and that I can look them up through the Secretary of State's website, I'm just not sure how to approach the owner...

In residential, the owner might be working with their mortgage company to keep it, sell to an investor, or have me list the property for them to sell on the open market.

I don't work with commercial property, so I'm not familiar with selling that kind of real estate (which I think is the only potential benefit for me reaching out to these leads, although their personal residences might be in trouble too).

Maybe I should team up with another agent in my office who sells commercial real estate and see if we might be able to work out a deal together or be co-agents.

Eric Odum · Answer

Look up the officers on NINETY THREE THIRTY SEVEN  HORTON ST LLC and contact them directly.  The State's Secretary should have the officer info and address.

More often than not, the occupant of the building is not the owner of the building.