How commercial property is sold in bankruptcy?
- The commercial property that is bankrupt is sold at auction
- The buyer-investor has a relationship with lenders and is able to step in and purchase the commercial property
- Buying the note
As an investor or owner purchasing bankrupt commercial property can be done via an auction. Also a buyer can step in and can make an offer that is lower than the current debt, When the offer is made, the lender could come back and make their own offer, if they feel the initial offer is much lower than the existing debt. Example: when purchasing bankrupt commercial property that is worth $10M dollars and the investor comes in and offers $8M, the lender holding the debt can come in and may offer $8.5M to take the property where the secured lender is just trading their debt. Sometimes courts do not let a secured lender do this. It is very important before you are purchasing bankrupt commercial property to consult a bankruptcy attorney when getting involved in this type of transaction. The bankrupt real estate market is not as prevalent when the economy is stronger in a specific part of the country such as Austin as of this writing.
Notes being purchased in the bankrupt real estate market
Notes can be freely sold in and out of a bankrupt real estate market. An investor can be trolling around to purchasing bankrupt commercial property via a note by looking at the bankruptcy notices. Properties that are held by trusts are sometimes sold at a larger discount than a lender. An investor has to be very good at searching a bankrupt real estate market for the right properties and also being very good at understanding property values. There are brokers, or special services who can be contacted and utilized or there may be a relationship with the real estate loan group to search a bankrupt real estate market whereas the investor can call and ask if there are any notes for sale. If a notice for sale is filed, an investor can make direct calls to the owner to purchase the commercial real estate property. There are some risks with deeply discounted notes in a bankrupt real estate market scenario being purchased. Again for more detailed help and consultation, a bankruptcy professional should be consulted. Keep in mind bankruptcy sales are almost always subject to auction. A strategy of loan to own is to purchase a note at a discounted amount then typically to flip the note at a profit which is a passive investment.