The world of commercial real estate is filled with opportunities, but it’s not without risk. When borrowers default on their loans, and all alternative resolution options have been exhausted, understanding how commercial real estate foreclosures work is necessary to protect your assets. If you’re wondering “How does commercial foreclosure work?” and your team lacks the time and resources to successfully complete a foreclosure, hiring a foreclosure partner is the best step forward.
The expert team at Total Lender Solutions has worked in the commercial real estate industry for over fifteen years. One frequent misunderstanding we encounter is that lenders often underestimate the complexity of commercial foreclosures. This is why a foreclosure expert is crucial.
We are experts in seven states: California, Texas, Arizona, Missouri, Washington, Oregon, and Nevada. Read below to learn more about some of the key aspects of commercial foreclosure.
How Does Commercial Foreclosure Work with Commercial Properties
Since every state has unique laws and regulations, it is impossible to learn everything there is to know about nonjudicial foreclosure law in one day, and getting the process started quickly is crucial to protecting your assets.
“For lenders, especially those enacting their first foreclosure, many confuse commercial real estate foreclosure with residential. While both types of foreclosures have strict guidelines and timelines that must be followed, commercial real estate is more likely to have additional complications, like multiple lienholders.”
— Randy Newman, CEO, Total Lender Solutions
Every state is different, but for the most part, nonjudicial compliance laws are created to protect borrowers from predatory lending practices. This is avoided by giving the borrower ample time to seek alternative resolution or to make their payments current.
A nonjudicial timeline typically has a pre-foreclosure stage, a sale stage, and post-foreclosure proceedings. The preforeclosure stage is typically broken into two stages. The entire process usually looks like this:
The Notice of Default Stage:
A borrower defaults on their loan if they miss a payment or otherwise breach their deed of trust. Most nonjudicial states require lenders to wait for a period of time before they can issue a document called a Notice of Default (NOD), sometimes called a breach letter. This document is usually required to be served to the borrower or posted in a conspicuous place.
This document outlines the specifics of the breach and the steps that must be taken to resolve the default. It will also outline what will happen if the borrower does not resolve the default or breach. In some nonjudicial states and for specific circumstances, lenders are required to meet with the borrower and discuss alternative action before issuing the next notice.
The Notice of Sale Stage:
While some waiting periods are longer than others depending on the state, most nonjudicial states require lenders to wait a certain amount of time for the borrower to cure the default. If no resolution has been reached at the end of that time period, the lender may issue a Notice of Sale (NOS) sometimes called a foreclosure notice. Same as the NOD, this document is usually required to be served to the borrower or posted in a conspicuous place. Many states also require that this notice be filed in the court of the county where the property is located, and made public in a county publication.
The NOS lists the exact date, time, and location the foreclosure sale will take place. There is typically a required waiting period between the time the NOS was first issued and when the sale can take place, the waiting period depends on the state. In many states, borrowers still have a period of time in which they can make their payments current or resolve the breach before their property is auctioned.
The Sale Stage:
If the borrower has not resolved the default by the say of the sale, it is auctioned off to the highest bidder. Many states have regulations about the specific day on which auctions must be held. Additionally, some states have added stipulations if the property ends up being bought by the lender itself.
Some states have a period of time after the auction in which the borrower may reclaim the property, but this typically requires them to make a balloon payment of the entire loan amount.
Importance of Hiring a Foreclosure Company
Lenders can benefit from hiring a foreclosure company by gaining insights into the foreclosure process for their specific state. Working with an experienced professional can help lenders explore options that can keep their team compliant while protecting lender assets.
Total Lender Solutions is your ultimate partner in optimizing recoveries on defaulted loans. With more than 15 years of industry expertise, our team consists of seasoned real estate professionals and legal experts. Our mission is to simplify complex procedures into straightforward resolutions for both institutional and private lenders.
As an extension of your team, we are committed to delivering comprehensive solutions and seamless communication throughout the entire process, from pre-foreclosure and notice of default to the final sale phase.
Take the first step toward success – get in touch with us today.
