Come to Us for Central Massachusetts Commercial Real Estate
John Reeder, our friend and colleague from the SVN | Mimi Song Realty Group in California, has graciously allowed us to share his article concerning distressed commercial property with you. Read on:
I have noticed among some people that I talk to that seems to be an odd distinction made between pricing for distressed and non-distressed properties. Or maybe the better way to put it is that there is a belief that is held by some that there is a difference between pricing for distressed and non-distressed properties. I've even heard some lobby groups attempt to advance the idea that appraisals should account for whether the property being appraised is like recent sales in terms of level of distress. I've always thought that there is something odd and illogical about this distinction. In my mind, the market price is the market price. Prices generally set to whatever level you have willing Buyers. Whether the property is distressed, or non-distressed, shouldn't really impact the price. I'll explain and also try to address an objection that I could see someone making in response to my thesis here.
To view the full article, please click here
John can be contacted at:
John Reeder
Sperry Van Ness | Mimi Song Realty Group
Cell: 951-847-6928 | Office: 909-989-8590 x 110
Reeder@svn.com
Article submitted by
Robert Yale, CCIM
Sperry Van Ness/ComVest Realty
508-351-7079
bobyale@svn.com
http://www.svndealbreaker.com/
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Damian Paletta of the Wall Street Journal has reported in the article below that the Feds are considering a new plan to allow banks to create workouts on commercial loans rather than letting the loans go into default. We realize that this would ulitmately have the potential to cause more bank failures if too many commerecial loan losses accumulate in the bank's portfolio.
As more tenants are renegotiating lease terms with their landlords, the investor's situation is most likely deteriorating potentially causing them to go into loan default. We know that many lenders have been doing workouts on their own initiative. It's good to see the feds working toward a practical solution while the commercial real estate market sorts itself out over the next few years.
"WASHINGTON - Federal bank regulators are close to issuing guidelines that would encourage lenders to rework troubled commercial real-estate loans, a sector of the economy they expect to topple scores of additional financial institutions."
Click here to read the full article
This article sumitted by Robert Yale, CCIM
contact bobyale@svn.com
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Would you recommend that I drop my asking price in today’s commercial real estate market? Y
You’ll hate this answer since it seems to waffle, but my answer is, “it depends”.
After all, what’s the definition of value? “What a willing buyer will pay a willing seller”. If your property is priced to attract buyers in our current market and it’s not selling, then there may be other factors such as location, condition, visual appeal - or is it a specialized user building with a high conversion cost? These can prevent offers from coming in from buyers.
But if your property is priced - not based on the current market, but rather on what you paid for it, what your mortgage balance is or what you just plain want for it – then be prepared for a long wait. Buyers today are not the same as buyers of even two or three years ago. At that time, investors were over paying based on true economic value because they too often felt there would be someone else out there who would over pay at an even higher rate. And perhaps they panicked thinking that if they didn’t buy the building of their dreams then, it wouldn’t be there in a short time.
That period of buying frenzy is now a foot note in history. It’s best to forget it and form a strategy based on what today’s market will bring. No one knows what the commercial real estate market will look like in one, two or even five years. The smartest people I’ve listened to predict at least a five year period to return to a “normal” market, whatever that is. No one predicts that it will look like the hyper inflated market of the earlier part of this decade.
The Wall Street Journal reported that “Feds Fret About Commercial Real Estate”. More financial pain is expected as they force banks to recognize losses. There’s even one dire prediction that as many as 45% of loans could be at risk. If your mortgage loan is “under water”, perhaps you should consider how to dispose of the property before your lender decides to foreclose. Some strategies might include a short sale with the lender’s cooperation, a voluntary auction or simply adjust your asking price to current market rates.
Some sellers want to keep their price artificially high hoping that a buyer will make an offer based on that price. This seldom works. Most buyers won’t make the effort to offer what they feel to be the real current value because they “might insult the seller”, or just don’t feel it’s worth the effort to go through a protracted negotiation when there are so many other properties available today. In the meantime, the commercial market prices are still trending down and future pricing is guesswork. If the Wall Street Journal’s pessimistic outlook is correct, prices will fall dramatically.
So, what will your pricing strategy be? Our purpose here is to help you create a plan that will bring you the best value available - today. The past is histiory, the present is now and the future is, well, muddled at best.
We'll be glad to offer our help in developing that strategy with you, or use your own real estate professional. The most important point is to be aware of current market conditions and price your property to sell.
This article submitted by Robert L Yale, CCIM
contact Bob at bobyale@svn.com
Central Massachusetts Commercial Real Estate