In the wake of the real estate crash, thousands of properties across the State of Florida have been left in distress. Commercial and residential real estate alike has suffered the effects of the real estate crash and the depressed economy in general.
However, with each passing day, we move farther and farther away from the recession, and closer and closer to prosperity. Indeed, many “experts” are now of the opinion that the real estate market has hit a bottom, and it appears there is some thawing in the transactional “freeze” that has crippled the real estate market for the last several years. Lenders are willing now more than ever to unload foreclosed properties (REO) and defaulted loans at discounted prices. Now may be the time to jump back into the real estate market and “seize the day”.
The best opportunities generally come from the worst circumstances, and this seems to be proving true when dealing with distressed real estate. On the one hand, a lender may be willing to part with REO at modest discounts, as it has already done the work in obtaining title to the property. Generally, once this happens, the lender has a fairly good idea of the condition of the property and its relative value, and thus may not be as willing to give as steep a discount. On the other hand, a lender may be willing to part with a defaulted loan at a much greater discount, as the uncertain foreclosure process still lies ahead and the lender still has little control over the condition of the property. The lender is often willing to trade that uncertainty and lack of control for a steep discount in price. Savvy real estate investors are taking advantage of these steep discounts, and are effectively decreasing the risk that comes with purchasing a defaulted loan. This usually comes in the form of an agreement with the borrower and guarantors, whereby the new lender agrees to waive or reduce personal liability on the loan in exchange for a “deed-in-lieu” of foreclosure or “friendly foreclosure”. This process is not as complicated as you may think and can provide a great opportunity to create significant value from today’s distressed real estate market.