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Permalink Reply by Alan Remigio on March 25, 2010 at 2:13pm

Commercial is different. Valuation has a different set of rules as "like kind" comps can be as much as 5 or 50 miles away. Also, a commercial appraiser should be used. They cost a lot more than a residential appraiser. Many lenders commonly use more than 2 valuations. Proof of Funds is a little more stringent. A fair amount of cash needs to be spent on due diligence with no guarantee of approval. This is why many investors dealing with residential short sales stay away from commercial. Also, due to economic conditions and continuing conservative bank practices, cash is king.A lot of other nuances that make it different from residential.

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Permalink Reply by Kimberley Kelly on September 17, 2010 at 2:04am

I also would like to know more about the differences between Commercial and Residential Short Sale policies and practices. I am being approached about Commercial Short Sales and believe there are going to be tons of these Short Sales happening in the coming year..

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Permalink Reply by Alan Remigio on September 17, 2010 at 6:25pm

Kimberly,

Short sales for commercial properties are different. The only thing similar is the fact that one can buy the property at a discounted price. Having said that, the purchase, managing and sale of the property is very much different than residential. For one, terms of the notes (4-units may come under the "resiential"umbrellla and longer term) are on the average 7 years long with some as long as 15-20 years with an amortization schedule as long as 40 years, created when the RE boom was going strong. Refi is the norm because of the short terms and rate.
The most common problem, currently, is the fact that refi is harder because underwriting rules are more stringent. Value is based on income and property value. So, theoretically, a properly managed commercial building does not lose much value if its income has met or exceeds projections. The problems facing commercial landlords is the fact that a common practice is to leverage the property as much as reasonably possible. It's a sound practice when done properly. With the downturn in the economy, vacancy and rent adjustments becomes prevalent, business credit may be called, reduced or shut down and with a much narrower qualifying window with lenders, action must now be taken to either shed the property from the portfolio or restructure the payment schedules through bankruptcy, negotiation (which includes a short sale) DIL or foreclosure.

The concept of strategic defaults come from this section of the RE industry. Funny how a sound business practice on one side is treated much like fraud in the residential side of the industry. Same bank, right? Much more could be talked about. I hope this gives you some insight.

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Permalink Reply by Kimberley Kelly on September 18, 2010 at 3:54am

Thank you Alan: I appreciate the info and will continue to do my own due diligence! Kim

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Permalink Reply by Shannon Noble on September 20, 2010 at 8:05am

I have buyers for all types of short sales commerical properties all over nationally.

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Permalink Reply by Alan Remigio on September 20, 2010 at 8:12am

Shannon,

I'm open. What do they want to buy and what is the least value they are looking for, as well as the highest value? Email me at [email protected]. I am on the east coast, PA, MD, NJ, DE, VA

Shannon Noble said:

I have buyers for all types of short sales commerical properties all over nationally.

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