Lenders who have exhausted their alternative resolution options and are now faced with enacting a foreclosure on their commercial properties often find themselves faced with a dilemma. If they delay foreclosure, they are likely to lose valuable assets. The longer they delay, the more assets they will be unable to recover. However, enacting the foreclosure process for commercial properties requires time, resources, and money. This process may take the team away from managing their current assets.
The professional experts at Total Lender Solutions have been helping lenders foreclose their commercial properties and protect their assets for over fifteen years. Lenders can both maximize their recovery and pay attention to their daily operations when we operate as an extension of their team.
Below are some things lenders can expect in the commercial foreclosure process:
What is Commercial Foreclosure?
Most loans secured by commercial real estate properties have Power of Sale clauses attached to the agreements. The clause gives lenders the right to sell the property, without going through the court system, in the event of default or a breach of contract. These commercial foreclosures, also known as non-judicial foreclosures, are more common and less financially straining than judicial foreclosures.
When lenders sell the property, they use the money from the sale to repay their loan. Due to innumerable reasons, such as prolonged foreclosure, delays, or changes in the market, a foreclosure sale will typically result in a deficiency. Most states do not allow deficiency judgments against borrowers in a nonjudicial foreclosure. Therefore, lenders must enact their foreclosures as soon as possible to maximize their recovery.
Related Article: Everything Lenders Need to Know About Commercial Real Estate Nonjudicial Foreclosures
How Does Commercial Foreclosure Work?
Because the state and national courts do not authorize foreclosure, state laws require strict compliance with the foreclosure process from lenders. This involves foreclosing the property in stages. While the timeline of foreclosure varies from state to state, the process usually takes place in four general phases:
- Notice of Default
- Notice of Sale
- Foreclosure Sale
- Post Foreclosure
The Notice of Default and Notice of Sale stages are both considered pre-foreclosure. In these stages, lenders are typically required to send notices to all of the involved parties and lienholders. State law dictates how these notices are issued, how often they must be issued, and for how long they must be issued before the foreclosure sale. Pre-foreclosure additionally gives borrowers time to cure their default or work out an alternative resolution option.
Related Article: What is Pre-foreclosure of a Commercial Property
State law dictates when and in what manner the sale must take place. States also have laws about what must happen to the property if the lender ends up being the one to buy the property. After the foreclosure sale, there is a post-foreclosure procedure to write up new documents and ensure that the sale was commercially reasonable.
Your Guide Through the Foreclosure Process for Commercial Properties
Failure to follow compliance with state law can be financially devastating to lenders, resulting in potential lawsuits and fines from the state. The right foreclosure partner is the best way to educate your team about foreclosure law and protect your business. The professional experts at Total Lender Solutions are intimately familiar with the complex world of foreclosure law in:
Our dedication and persistence when it comes to the foreclosure process ensure that our clients feel confident in reaching a successful outcome. Contact us today for an initial consultation on your defaulted property.
