Commercial properties are considered distressed primarily when the owner experiences financial trouble and is unable to pay the mortgage or other debts. However, the “distressed” label also applies to properties that have deteriorating conditions either from poor management or environmental causes. As a result, distressed properties often have below-market occupancy rates, high vacancy rates or have become obsolete, either physically or functionally. In such cases, buyers who are willing to undertake rehabilitating or repositioning the property may find a unique investment opportunity.
When a property’s owner is facing financial difficulties and cannot pay their mortgage but want to avoid a foreclosure, then can sell the property for less than they owe on the mortgage as a “short sale”, with the approval of their lender. The owner sells the property for a reduced amount and the lender forgives the remaining debt.
Sometimes when an owner defaults on their mortgage loan and the lender initiates foreclosure proceedings, that commercial property may be offered for public sale in an auction. A foreclosure auction allows the lender to recoup some of the outstanding mortgage debt and may provide strong opportunities for investors to purchase the property at a discount.
When a borrower defaults on their mortgage loan and is unable to sell the property through a short sale or foreclosure auction, ownership is then assumed by the lender. This is referred to as an REO property, or “real estate owned.”
Distressed properties can be an excellent business opportunity for investors. Coldwell Banker Commercial® affiliated professionals provide the expertise and guidance that both buyers and sellers need in these unique transactions. Professionals specializing in distressed properties can help ensure a successful transaction by identifying risks and opportunities to help you maximize returns, helping with repositioning the property and connecting you with financing lenders. You can rely on a CBC® affiliated professional to act as an advisor who is there to help you navigate the complexities of a distressed property transaction.
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Distress was supposed to arrive at commercial real estate’s door in 2021, but it never materialized. Research by Real Capital Analytics (RCA) shows there were low levels of troubled CRE assets that hit the market, despite the dire predictions and investors’ expectations that 2021 would produce opportunities to buy properties at steep discounts.
Gentrification is a controversial topic in many markets in the U.S. because it can significantly impact specific areas and residents in those communities. According to Million Acres, some of the poorest and most distressed urban neighborhoods across the country have experienced revitalization via gentrification and redevelopment. That has been accomplished through national and local tax incentives and resulted in billions of dollars in development funds, and municipal grants flowing into those improvements. Gentrification might seem like an easy solution for struggling cities, but there are many complicated factors to consider. In this article, we explore the positive and negative impacts of gentrification on real estate markets, and what investors and government officials should consider when looking to gentrify an area.
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