Not only can you foreclose on a variety of commercial buildings but can also include land. Vacant land can cover a wide range of topographies, from the waterfront to the middle of the city or the middle of nowhere. Hard money lenders may find that their borrowers fail to make payments, fail to communicate or fail to meet compliance requirements for developing on the land. Lenders needing to enact foreclosures on a plot of vacant land may find it difficult to get specific answers to their queries, especially if they are enacting a foreclosure for the first time.
How Do Land Foreclosures Work?
Foreclosing vacant land follows most of the same process that any commercial real estate property follows in the nonjudicial route. The foreclosure process varies depending on the state, but most nonjudicial states will have a notice of default, or pre-foreclosure stage, a notice of sale stage, a sale stage, and various post-sale requirements.
If not entering into a forbearance agreement with the borrower, pre-foreclosure requires lenders to send borrowers notices according to each state’s compliance laws, with some states requiring lenders to serve notices in person. After the specified waiting period has passed and the correct sequence of notices has been issued, a property moves into the notice of sale stage, where the exact date, time and location of the sale are determined. Notices are typically required to be made public in some way, usually through a county newspaper. Lenders must wait the specified amount of time according to the compliance laws of the state where the land is located, during which time borrowers can halt the process by curing the default. The sale happens on the day specified by the notice of sale.
How is a Vacant Land Foreclosure Different?
From the perspective of a lender, a plot of vacant land is typically easier to foreclose than a traditional commercial real estate property building because pre-foreclosure compliance requirements, like the Homeowner’s Bill of Rights, Dodd-Frank, or Balloon Notices, are not applicable to vacant land unless explicitly stated in the note. If there is no address associated with the vacant land, lenders will need to include the legal description of the land.
Although lenders may have made a loan for what was originally vacant land, it is not infrequent that lenders find that someone has built something on the land without approval, either from the lender or from the local jurisdiction. The building might be a small shack or other structure.
Land Foreclosure Solutions for Lenders
It is not uncommon for lenders to let months or even years of missed payments go by without beginning the foreclosure or UCC sales process. Lenders may feel the frustration of not hearing back from the borrower or may have exhausted all of their alternative resolution options. The commercial foreclosure process may seem daunting. However, with the right third-party council, lenders can enact the foreclosure process without having to take attention away from their business and customers.
Total Lender Solutions advocates for lenders looking to maximize recoveries on defaulted loans. Our team is made up of highly experienced real estate professionals and legal experts. From vacant lands to foreclosing on hotels, our solutions are comprehensive and seamless, from pre-foreclosure and notice of default to the final sale phase. Contact us today.
