well landscaped. We found an investor from out of town. He got
a Class A building for a Class B price.”
In a foreclosure, where there are often a lot of discordant
moving pieces, the buyer also has to get to a comfort level
before jumping into what on the surface either looks like a good
deal or a hornet’s nest of problems or both.
“The buyer needs to feel comfortable,” asserts Terry Coyne,
SIOR, CCIM, an executive vice president for Grubb & Ellis in
its Cleveland office. “First thing is, you need to make the buyer
aware of what is happening every step of the way. Transparency
is important. Secondly, the more complex the foreclosure, the
more it should be reflected in the price.”
Coyne has one other piece of advice for prospective buyers
and the brokers who represent them. Buy in before the foreclo-
sure process is completed.
“If you buy pre-foreclosure, you are going to get a better deal
than post-foreclosure,” Coyne maintains. “Typically, a bank
doesn’t want to own the property, but if they have to take ownership, they will act like an owner. We had one deal where the sale
of the mortgage would have been less expensive had a buyer
purchased the mortgage before the foreclosure finished, but he
chose not to, and the bank servicers in effect said, ‘We are the
owners now and we want more money.’”
Bottom of the Bottom Line
As noted, in many cases the lender or special servicer wants
to get rid of the foreclosed property as expediently as possible,
which means biting the bullet on pricing.
“What’s the secret in getting foreclosed property sold? I can
sum that up in five letters, p-r-i-c-e,” says Gabriel Silverstein,
THE GEENTY GROUP, REALTORS 765 E. MAIN STREET BRANFORD, CT 06405 T (203) 488-1005 WWW.GEENTYGROUP.COM YOUR NETWORK PARTNER IN CONNECTICUT BROKERAGE I SITESELECTION I SOLUTIONS Kristin T. Geenty, SIOR & Kevin C.Geenty, SIOR
“You need to make the buyer
aware of what is happeneing
every step of the way.
Transparecy is important.”
SIOR, president of Angelic Real Estate in New York City. “If
the bank is realistic and motivated enough to take the price that
the bid side of the bid-ask spread chooses in the market, the deal
gets done. If the bank is still somehow rooted in its cost basis on
the land, invariably it’s just a waste of everyone’s time.”
Price-driven deals are often not as easy to establish as one
thinks, depending on where the loan originated and which gov-
ernment agency oversees that loan.
The Temecula Valley (California) office of Lee & Associates
represents about eight banks on a large number of foreclosed
properties in its area. One of those banks had been taken over by
the FDIC.
For foreclosed properties involving the FDIC everything
is driven pricewise to the appraisal, explains Michael Strode,
SIOR, a principal/senior vice president with Lee & Associates
in Temecula. “We give a broker’s opinion of value, and then
we try to reconcile that to the asking price, which is usually the
appraisal price.”
The problem is that the appraisal price is often higher than
the broker’s opinion of value.
“If we don’t get any offers or activity in 60 days,” says Strode,
“we typically go back and review the appraisal, trying to get the
appraiser to lower the asking price.”
Pricing is important, Castell reiterates. “We typically provide
tiered pricing depending on the seller’s objectives. In a custom-
ary situation where there are no unusual motivations, we start at
the upper end of the value ranges, but we had one instance where
the banks told us they wanted to be out of the building over the
next three to six months. That was a different strike price.”
Stabilization
Not every lender or servicer has the same goal. Rogers explains,
“There are some lenders saying, ‘I’m not ready to write this
down yet, I can’t take the hit. But I do have the ability to make
sure the grounds are being landscaped and to get a property
manager involved. I have a very low-cost basis in this; it’s a
good building in a good area. I can hold on, so let’s try to find a
decent deal.’”
Foreclosed properties can be tenanted, but more often then
not have been vacated—sometimes for a very long time—so it’s
important to get the property stabilized, which means cleaning,
landscaping, and rehabbing. All this usually means bringing in a
property manager.
“What we encourage owners to do right away is to hire
very knowledgeable local property management,” says Mark
Triska, SIOR, a senior vice president for Colliers International
in Pleasanton, California. “Putting the property owner and bank
together with a local property manager is the first thing to do to
get the property stabilized.”
